DETERMINANTS OF THE FINANCIAL PERFORMANCE AND SUSTAINABILITY OF MICROFINANCE INSTITUTIONS IN TOGO

Purpose - This article investigates the factors influencing the financial performance and the level of financial sustainability of microfinance institutions (MFIs) in Togo. Methodology - Ordinary least squares models and binary probit models were employed in the research to identify the determinants of return on assets as a proxy for the financial performance and operational and financial sustainability of microfinance institutions. Unbalanced panel data collected from the MIX Market database of 29 MFIs in Togo over the period 1999–2018 was used in the study Findings – The results show that MFI's financial performance is positively and statistically influenced by size. However, the number of depositors per borrower and the loan loss ratio is negatively linked to financial performance. The operational sustainability was positively related to the depositors per borrower ratio, the PAR > 30 (Portfolio at Risk 30 days), and the productivity ratio. On the other hand, it is negatively related to PAR > 90 and the ratio of personal expenses to outstanding credit. Finally, financial sustainability was significantly and positively influenced by the size, and it was significantly and negatively influenced by PAR > 90. Conclusions – Taking these results into account can allow microfinance actors in Togo as well as politicians and donors to better orient their actions in the sector.