Impact of Rule of Law and Government Size to the Microfinance Efficiency

Figures & data

Table 1. Descriptions of MFIs specific, macroeconomic and economic freedom variables.

Variable	Description	Data source
MFI specific determinants
lnROAA	A proxy of profitability computed as the natural logarithm of the return on average assets.	MIX (Microfinance Information Exchange) https://www.themix.org/
lnAge	A proxy of MFI age computed as the natural logarithm of the total number of years operation of MFI.	MIX (Microfinance Information Exchange) https://www.themix.org/
lnTOA	A proxy of MFI size computed as the natural logarithm of total MFI assets.	MIX (Microfinance Information Exchange) https://www.themix.org/
Macroeconomic determinants
lnINF	A proxy of consumer price index computed as the natural logarithm of the consumer price index.	International Monetary Fund (IMF) https://www.imf.org/external/
lnGDP	A proxy of gross domestic product computed as the natural logarithm of the national gross domestic product.	International Monetary Fund (IMF) https://www.imf.org/external/
Economic freedom components
Rule of law
lnPR (Property rights)	A proxy of property right. The extent to which a country’s legal framework allows individuals to acquire, hold, and utilize private property, secured by clear laws that the government enforces effectively.	Heritage Foundation’s Index https://www.heritage.org/index/
lnGI (Government integrity)	A proxy of government integrity. Systemic corruption of government institutions and decision-making by such practices as bribery, extortion, nepotism, cronyism, patronage, embezzlement, and graft.	Heritage Foundation’s Index https://www.heritage.org/index/
Government size
lnGS (Government spending)	A proxy of government spending. The burden imposed by government expenditures, which includes consumption by the state and all transfer payments related to various entitlement programs.	Heritage Foundation’s Index https://www.heritage.org/index/
lnTB (Tax burden)	A proxy of tax burden. Marginal tax rates on both personal and corporate income and the overall level of taxation (including direct and indirect taxes imposed by all levels of government) as a percentage of gross domestic products (GDP).	Heritage Foundation’s Index https://www.heritage.org/index/

Source: Microfinance Information Exchange (MIX), Heritage Foundation’s Index and authors’ own calculations.

Figure 1. Trend of social efficiency score in 2011–2018. Source: Microfinance Information Exchange (MIX), and authors’ own calculations.

Figure 2. Trend of financial efficiency score in 2011–2018. Source: Microfinance Information Exchange (MIX), and authors’ own calculations.

Table 2. Descriptive statistics of MFIs social and financial efficiency.

Year	Details	SocE			FinE
		PTecE	ScaE	TecE	PTecE	ScaE	TecE
2011	Avg	0.460	0.815	0.382	0.771	0.948	0.730
	Min	0.077	0.239	0.039	0.165	0.178	0.029
	Max	1.000	1.000	1.000	1.000	1.000	1.000
	SD	0.274	0.189	0.264	0.175	0.118	0.180
	Full Eff (No.)	18	11	11	23	19	14
	Full Eff (%)	10.778	6.587	6.587	13.772	11.377	8.383
2012	Avg	0.468	0.744	0.353	0.777	0.943	0.736
	Min	0.034	0.116	0.027	0.054	0.010	0.010
	Max	1.000	1.000	1.000	1.000	1.000	1.000
	SD	0.267	0.266	0.263	0.172	0.115	0.177
	Full Eff (No.)	18	11	10	22	25	15
	Full Eff (%)	10.778	6.587	5.988	13.174	14.970	8.982
2013	Avg	0.498	0.789	0.401	0.765	0.932	0.712
	Min	0.079	0.283	0.073	0.415	0.231	0.132
	Max	1.000	1.000	1.000	1.000	1.000	1.000
	SD	0.266	0.213	0.265	0.160	0.113	0.171
	Full Eff (No.)	18	13	13	24	17	15
	Full Eff (%)	10.778	7.784	7.784	14.371	10.180	8.982
2014	Avg	0.556	0.810	0.453	0.788	0.927	0.730
	Min	0.151	0.348	0.086	0.361	0.218	0.138
	Max	1.000	1.000	1.000	1.000	1.000	1.000
	SD	0.260	0.171	0.251	0.160	0.118	0.176
	Full Eff (No.)	20	16	15	25	21	18
	Full Eff (%)	11.976	9.581	8.982	14.970	12.575	10.778
2015	Avg	0.439	0.756	0.333	0.778	0.953	0.741
	Min	0.053	0.058	0.042	0.232	0.264	0.144
	Max	1.000	1.000	1.000	1.000	1.000	1.000
	SD	0.276	0.257	0.273	0.165	0.099	0.177
	Full Eff (No.)	15	13	13	20	24	15
	Full Eff (%)	8.982	7.784	7.784	11.976	14.371	8.982
2016	Avg	0.542	0.860	0.467	0.795	0.933	0.740
	Min	0.077	0.428	0.062	0.279	0.238	0.146
	Max	1.000	1.000	1.000	1.000	1.000	1.000
	SD	0.270	0.148	0.262	0.162	0.114	0.173
	Full Eff (No.)	22	17	16	25	16	13
	Full Eff (%)	13.174	10.180	9.581	14.970	9.581	7.784
2017	Avg	0.502	0.786	0.402	0.788	0.943	0.743
	Min	0.079	0.283	0.073	0.295	0.256	0.146
	Max	1.000	1.000	1.000	1.000	1.000	1.000
	SD	0.261	0.216	0.262	0.159	0.103	0.170
	Full Eff (No.)	18	12	12	21	14	13
	Full Eff (%)	10.778	7.186	7.186	12.575	8.383	7.784
2018	Avg	0.499	0.772	0.391	0.788	0.948	0.746
	Min	0.083	0.262	0.067	0.288	0.309	0.287
	Max	1.000	1.000	1.000	1.000	1.000	1.000
	SD	0.263	0.225	0.260	0.158	0.093	0.167
	Full Eff (No.)	17	10	10	23	20	15
	Full Eff (%)	10.180	5.988	5.988	13.772	11.976	8.982
All Years	Avg	0.496	0.791	0.398	0.781	0.941	0.735
	Min	0.034	0.058	0.027	0.054	0.01	0.01
	Max	1.000	1.000	1.000	1.000	1.000	1.000
	SD	0.269	0.216	0.265	0.164	0.109	0.174
	Full Eff (No.)	146	103	100	183	156	118
	Full Eff (%)	10.928	7.710	7.485	13.698	11.677	8.832

Source: Microfinance Information Exchange (MIX), and authors’ own calculations.

Table 3. Parametric and non-parametric robustness test for social and financial efficiency scores.

Region	Parametric test			Non-parametric test
	t-test			Mann-Whitney			Kruskall-Wallis
				[Wilcoxon Rank-Sum] test			Equality of populations test
	t (Prb > t)			z(Prb > z)			X² (Prb > X²)
	PTecE	ScaE	TecE	PTecE	ScaE	TecE	PTecE	ScaE	TecE
Panel A: Year 2011
TH	0.617	2.497^b	4.680^a	−0.769	−2.085^b	−2.887^a	0.592	4.349^b	8.337^a
	(0.071)	(0.344)	(0.403)	(1.500)	(4.333)	(6.000)	(1.500)	(4.333)	(6.000)
PH	−9.086^a	−6.052^a	−9.940^a	−7.718^a	−6.773^a	−8.113^a	59.561^a	45.871^a	65.822^a
	0.29	0.099	0.317	58.593	51.407	61.605	58.593	51.407	61.605
MA	−2.879^b	−1.590	−2.891^b	−2.082^b	−1.621	−2.082^b	4.333^b	2.628	4.333^b
	0.251	0.017	0.251	4.333	3.333	4.333	4.333	3.333	4.333
ID	−9.563^a	−6.394^a	−11.091^a	−6.727^a	−6.457^a	−7.240^a	45.257^a	41.688^a	52.419^a
	0.387	0.209	0.45	41.983	40.31	45.207	41.983	40.31	45.207
CM	−2.954^a	−2.007^b	−3.400^a	−1.624	−1.362	−2.504^b	2.637	1.855	6.270^b
	0.219	0.120	0.271	5.737	4.895	9.000	5.737	4.895	9.000
ALL	−12.354 ^a	−7.711 ^a	−14.076 ^a	−104.228 ^a	−91.066 ^a	−116.234 ^a	97.465 ^a	74.335 ^a	121.039 ^a
	0.311	0.133	0.348	9.872	8.622	11.002	9.872	8.622	11.002
Panel B: Year 2012
TH	0.852	2.741^b	5.476^a	−0.769	−2.406^b	−2.887^a	0.592	5.789^b	8.337^a
	(0.087)	(0.353)	(0.422)	(1.500)	(5.000)	(6.000)	(1.500)	(5.000)	(6.000)
PH	−9.715^a	−5.440^a	−10.779^a	−8.115^a	−5.254^a	−8.618^a	65.851^a	27.600^a	74.278^a
	0.291	0.13	0.33	61.616	39.872	65.442	61.616	39.872	65.442
MA	−2.693^b	−1.704	−2.941^b	−1.922^c	−2.571^b	−2.082^b	3.692^c	6.610^b	4.333^b
	0.225	0.103	0.245	4.000	5.333	4.333	4.000	5.333	4.333
ID	−10.406^a	−10.490^a	−15.108^a	−6.847^a	−7.322^a	−8.037^a	46.876^a	53.609^a	64.589^a
	0.396	0.382	0.551	42.69	45.672	50.172	42.69	45.672	50.172
CM	−2.006^c	−0.402	−2.209^b	−1.625	−0.395	−1.916^c	2.642	0.156	3.672^c
	0.168	0.029	0.195	5.789	1.421	6.895	5.789	1.421	6.895
ALL	−12.585 ^a	−8.882 ^a	−15.584 ^a	−10.048 ^a	−8.067 ^a	−11.610 ^a	100.954 ^a	65.070 ^a	134.791 ^a
	0.309	0.199	0.382	106.084	85.18	122.659	106.084	85.18	122.659
Panel C: Year 2013
TH	0.209	0.542	1.129	−0.245	−0.802	−0.962	0.060	0.643	0.926
	(0.028)	(0.113)	(0.199)	(0.500)	(1.667)	(2.000)	(0.500)	(1.667)	(2.000)
PH	−8.660^a	−5.135^a	−9.639^a	−7.523^a	−5.005^a	−8.013^a	56.599^a	25.049^a	64.210^a
	0.251	0.108	0.281	57.128	38.000	60.849	57.128	38.000	60.849
MA	−2.358^b	−1.975	−2.603^b	−2.082^b	−2.085^b	−2.242^b	4.333^b	4.349^b	5.026^b
	0.197	0.118	0.217	4.333	4.333	4.667	4.333	4.333	4.667
ID	−9.060^a	−7.619^a	−11.048^a	−6.437^a	−6.307^a	−7.281^a	41.429^a	39.774^a	53.009^a
	0.340	0.253	0.433	40.121	39.362	45.448	40.121	39.362	45.448
CM	−2.242^b	−0.727	−2.095^b	−1.371	−0.133	−1.561	1.88	0.018	2.438
	0.161	0.037	0.169	4.789	0.474	5.579	4.789	0.474	5.579
ALL	−11.122^a	−7.676^a	−12.768^a	−9.169^a	−6.956^a	−10.469^a	84.064^a	48.382^a	109.595^a
	0.267	0.143	0.312	96.790	73.473	110.593	96.790	73.473	110.593
Year 2014
TH	0.200	0.536	1.106	−0.245	−0.642	−0.964	0.060	0.412	0.930
	(0.026)	(0.111)	(0.195)	(0.500)	(1.333)	(2.000)	(0.500)	(1.333)	(2.000)
PH	−8.544^a	−6.705^a	−9.880^a	−7.261^a	−6.626^a	−8.243^a	52.729^a	43.910^a	67.948^a
	0.241	0.113	0.280	55.140	50.314	62.593	55.140	50.314	62.593
MA	−2.259^b	−2.905^b	−2.605^b	−1.761^c	−2.722^a	−1.922^c	3.103^c	7.410^a	3.692^c
	0.180	0.153	0.205	3.667	5.667	4.000	3.667	5.667	4.000
ID	−8.256^a	−4.266^a	−8.309^a	−5.879^a	−4.190^a	−6.201^a	34.560^a	17.553^a	38.450^a
	0.297	0.118	0.334	36.603	26.121	38.690	36.603	26.121	38.690
CM	−0.899	−2.539^b	−2.281^b	−0.704	−1.900^c	−2.018^b	0.495	3.611^c	4.073^b
	0.030	0.171	0.169	2.474	6.789	7.211	2.474	6.789	7.211
ALL	−9.810^a	−7.318^a	−11.676^a	−8.073^a	−7.443^a	−9.976^a	65.181^a	55.402^a	99.528^a
	0.232	0.118	0.277	85.210	78.599	105.371	85.210	78.599	105.371
Year 2015
TH	0.192	0.502	1.085	−0.245	−0.802	−0.969	0.060	0.643	0.940
	(0.025)	(0.105)	(0.191)	(0.500)	(1.667)	(2.000)	(0.500)	(1.667)	(2.000)
PH	−12.364^a	−6.673^a	−15.072^a	−9.008^a	−7.557^a	−9.733^a	81.152^a	57.112^a	94.726^a
	0.355	0.183	0.417	68.407	57.372	73.907	68.407	57.372	73.907
MA	−2.426^b	−2.376^b	−2.517^b	−1.441	−2.491^b	−1.601	2.077	6.204^b	2.564
	0.183	0.077	0.191	3.000	5.167	3.333	3.000	5.167	3.333
ID	−10.195^a	−6.731^a	−10.947^a	−6.832^a	−5.944^a	−6.956^a	46.681^a	35.333^a	48.382^a
	0.390	0.255	0.476	42.638	37.034	43.414	42.638	37.034	43.414
CM	−2.468^b	−1.655	−2.895^a	−1.684^c	−1.182	−2.261^b	2.837^c	1.398	5.112^b
	0.148	0.071	0.193	5.842	4.211	8.053	5.842	4.211	8.053
ALL	−13.591^a	−9.238^a	−16.192^a	−10.416^a	−9.242^a	−11.694^a	108.496^a	85.416^a	136.742^a
	0.338	0.197	0.408	110.006	97.587	123.533	110.006	97.587	123.533
Year 2016
TH	0.853	2.761^b	5.270^a	−0.769	−2.887^a	−2.892^a	0.592	8.337^a	8.366^a
	(0.087)	(0.355)	(0.428)	(1.500)	(6.000)	(6.000)	(1.500)	(6.000)	(6.000)
PH	−8.744^a	−4.478^a	−9.607^a	−7.422^a	−4.608^a	−8.119^a	55.091^a	21.238^a	65.919^a
	0.256	0.072	0.280	56.360	34.988	61.651	56.360	34.988	61.651
MA	−2.601^b	−2.697^b	−2.732^b	−1.441	−2.903^b	−1.761^c	2.077	8.426^b	3.103^c
	0.184	0.073	0.194	3.000	6.000	3.667	3.000	6.000	3.667
ID	−8.447^a	−4.112^a	−8.538^a	−5.811^a	−4.209^a	−6.143^a	33.773^a	17.715^a	37.734^a
	0.308	0.106	0.342	36.224	26.259	38.345	36.224	26.259	38.345
CM	−1.980^c	−0.368	−1.743^c	−1.467	−0.088	−1.146	2.152	0.008	1.314
	0.111	0.020	0.116	4.947	(0.316)	4.105	4.947	(0.316)	4.105
ALL	−10.394^a	−5.064^a	−11.263^a	−8.437^a	−5.513^a	−9.480^a	71.181^a	30.396^a	89.870^a
	0.253	0.073	0.273	89.030	58.228	100.144	89.030	58.228	100.144
Year 2017
TH	0.634	2.566^b	4.562^a	−0.769	−2.406^b	−2.887^a	0.592	5.789^b	8.337^a
	(0.072)	(0.346)	(0.409)	(1.500)	(5.000)	(6.000)	(1.500)	(5.000)	(6.000)
PH	−9.289^a	−5.363^a	−10.112^a	−7.834^a	−5.330^a	−8.168^a	61.375^a	28.405^a	66.715^a
	0.272	0.112	0.304	59.488	40.465	62.023	59.488	40.465	62.023
MA	−2.622^b	−1.951	−2.681^b	−1.441	−1.932^c	−1.444	2.077	3.731^c	2.084
	0.198	0.030	0.201	3.000	4.000	3.000	3.000	4.000	3.000
ID	−9.882^a	−8.027^a	−12.030^a	−6.659^a	−6.419^a	−7.423^a	44.337^a	41.205^a	55.100^a
	0.367	0.264	0.469	41.517	40.069	46.345	41.517	40.069	46.345
CM	−2.704^b	−1.931^c	−3.059^a	−1.869^c	−1.379	−2.244^b	3.493	1.901	5.034
	0.152	0.101	0.209	6.632	4.947	8.053	6.632	4.947	8.053
ALL	−12.103^a	−8.469^a	−14.065^a	−9.638^a	−7.798^a	−10.848^a	92.893^a	60.804^a	117.683^a
	0.286	0.157	0.340	101.766	82.371	114.611	101.766	82.371	114.611
Year 2018
TH	0.795	2.568^b	5.310^a	−0.769	−2.406^b	−2.882^a	0.592	5.789^b	8.308^a
	(0.083)	(0.340)	(0.409)	(1.500)	(5.000)	(6.000)	(1.500)	(5.000)	(6.000)
PH	−9.791^a	−6.079^a	−10.960^a	−7.946^a	−6.140^a	−8.505^a	63.139^a	37.699^a	72.331^a
	0.280	0.130	0.323	60.337	46.616	64.581	60.337	46.616	64.581
MA	−2.640^b	−2.574^b	−2.694^b	−1.922^c	−2.908^b	−1.922^c	3.692^c	8.456^b	3.692^c
	0.230	0.040	0.234	4.000	6.000	4.000	4.000	6.000	4.000
ID	−9.781^a	−9.221^a	−12.770^a	−6.659^a	−6.873^a	−7.725^a	44.337^a	47.240^a	59.670^a
	0.362	0.295	0.481	41.517	42.897	48.224	41.517	42.897	48.224
CM	−2.456^b	−1.549	−2.886^a	−1.505	−1.161	−2.229^b	2.264	1.348	4.969^b
	0.153	0.087	0.207	5.316	4.158	8.000	5.316	4.158	8.000
ALL	−12.159^a	−9.357^a	−14.809^a	−9.640^a	−8.655^a	−11.236^a	92.937^a	74.901^a	126.244^a
	0.289	0.176	0.354	101.784	91.413	118.707	101.784	91.413	118.707
All Years
TH	0.844	2.559^b	4.220^a	−0.945	−2.927^a	−3.629^a	0.893	8.569^a	13.168^a
	(0.058)	(0.257)	(0.329)	(3.000)	(9.688)	(12.000)	(3.000)	(9.688)	(12.000)
PH	−26.821^a	−15.981^a	−30.082^a	−22.263^a	−16.700^a	−23.936^a	495.656^a	278.885^a	572.954^a
	0.280	0.118	0.317	476.946	357.721	512.799	476.946	357.721	512.799
MA	−4.362^a	−2.935^a	−4.614^a	−3.015^a	−3.724^a	−3.166^a	9.091^a	13.868^a	10.025^a
	0.206	0.076	0.217	10.000	12.313	10.500	10.000	12.313	10.500
ID	−26.596^a	−19.605^a	−30.985^a	−18.412^a	−16.917^a	−20.242^a	339.001^a	286.180^a	409.737^a
	0.356	0.235	0.442	323.513	297.446	356.065	323.513	297.446	356.065
CM	−6.253^a	−3.876^a	−7.273^a	−4.040^a	−2.646^a	−5.606^a	16.318^a	7.003^a	31.431^a
	0.143	0.080	0.191	39.671	26.520	56.197	39.671	26.520	56.197
ALL	−33.148^a	−22.549^a	−38.822^a	−26.617^a	−22.051^a	−30.562^a	708.479^a	486.261^a	934.007^a
	0.286	0.149	0.337	793.772	657.889	912.001	793.772	657.889	912.001

Note:

1) Figure in italic indicates the difference value of average score under parametric test and difference value of average rank score under non-parametric tests between social and financial efficiency.

2) Figure in parentheses ( ) indicates the social efficiency that is higher than financial efficiency of MFIs’ average or average rank.

^a,b,cSignificance at 1%, 5% and 10% levels, respectively.

Source: Microfinance Information Exchange (MIX), and authors’ own calculations.

Table 4. Regression result on the social efficiency of microfinance institutions.

	M1			M2			M3
Variable	PoOLS	FEMod	REMod	PoOLS	FEMod	REMod	PoOLS	FEMod	REMod
C	0.966^a	−2.465^a	−0.065	−0.118	−5.245^a	−2.639^a	0.481	−5.363^a	−2.520^a
	(0.150)	(0.550)	(0.313)	(0.275)	(0.686)	(0.489)	(0.414)	(0.689)	(0.480)
MFI’s specific variables
lnROAA	0.101^a	1.099^a	0.055	0.206^a	1.221^a	0.349^a	0.195^a	1.251^a	0.342^a
	(0.033)	(0.372)	(0.079)	(0.038)	(0.353)	(0.089)	(0.038)	(0.354)	(0.086)
lnAGE	−0.280^a	0.160	−0.188^a	−0.301^a	−0.244	−0.312^a	−0.301^a	−0.270^c	−0.313^a
	(0.030)	(0.150)	(0.069)	(0.031)	(0.152)	(0.072)	(0.031)	(0.153)	(0.069)
lnTOA	−0.064^a	0.030	−0.015	−0.055^a	−0.017	−0.011	−0.056^a	−0.024	−0.012
	(0.010)	(0.032)	(0.020)	(0.010)	(0.031)	(0.019)	(0.010)	(0.032)	(0.019)
Macroeconomics variables
lnINF				0.062^a	0.077^a	0.074^a	0.064^a	0.079^a	0.074^a
				(0.017)	(0.007)	(0.007)	(0.017)	(0.007)	(0.007)
lnGDP				0.113^a	0.593^a	0.340^a	0.102^a	0.652^a	0.332^a
				(0.026)	(0.092)	(0.053)	(0.027)	(0.099)	(0.052)
Rule of law & Government size variables
lnPR							−0.143^c	−0.052	−0.010
							(0.074)	(0.032)	(0.030)
lnGI
lnGS
lnTB
R^sq	0.115	0.873	0.007	0.134	0.886	0.097	0.136	0.886	0.097
Adj R^sq	0.113	0.854	0.005	0.130	0.869	0.094	0.132	0.869	0.093
F-stat	57.653^a	47.255^a	3.328^a	41.000^a	52.810^a	28.680^a	34.859^a	52.589^a	23.829^a
B & PLM chi^sq	3220.060^a			3313.190^a			3278.190^a
Hausman chi^sq		28.930^a			31.074^a			50.962^a
Final model	FEMod			FEMod			FEMod
No. Obs.	1336	1336	1336	1336	1336	1336	1336	1336	1336
	M4			M5			M6
Variable	PoOLS	FEMod	REMod	PoOLS	FEMod	REMod	PoOLS	FEMod	REMod
C	2.344^a	−5.206^a	−2.464^a	1.066	−5.266^a	−0.341	−18.516^a	−18.464^a	−19.213^a
	(0.409)	(0.688)	(0.468)	(3.904)	(0.971)	(2.053)	(1.711)	(6.102)	(3.392)
MFI’s specific variables
lnROAA	0.038	1.201^a	0.326^a	0.210^a	1.047^a	0.352^a	0.146^a	1.219^a	0.279^a
	(0.043)	(0.354)	(0.080)	(0.041)	(0.361)	(0.089)	(0.037)	(0.353)	(0.081)
lnAGE	−0.305^a	−0.210	−0.301^a	−0.300^a	−0.318^a	−0.319^a	−0.208^a	−0.197	−0.225^a
	(0.030)	(0.158)	(0.066)	(0.031)	(0.124)	(0.072)	(0.031)	(0.154)	(0.068)
lnTOA	−0.058^a	−0.014	−0.014	−0.055^a	−0.051^b	−0.014	−0.064^a	−0.010	−0.019
	(0.010)	(0.032)	(0.018)	(0.010)	(0.023)	(0.020)	(0.010)	(0.032)	(0.018)
Macroeconomics variables
lnINF	0.020	0.078^a	0.077^a	0.063^a	0.065^a	0.076^a	0.022	0.078^a	0.074^a
	(0.018)	(0.008)	(0.007)	(0.018)	(0.005)	(0.007)	(0.017)	(0.007)	(0.007)
lnGDP	0.065^b	0.555^a	0.298^a	0.121^a	0.501^a	0.341^a	0.147^a	0.574^a	0.333^a
	(0.026)	(0.103)	(0.050)	(0.036)	(0.044)	(0.053)	(0.025)	(0.092)	(0.049)
Rule of law & Government size variables
lnPR
lnGI	−0.557^a	0.031	0.051
	(0.070)	(0.039)	(0.035)
lnGS				−0.278	0.357^b	−0.496
				(0.914)	(0.165)	(0.429)
lnTB							4.098^a	2.973^b	3.749^a
							(0.377)	(1.364)	(0.747)
R^sq	0.173	0.886	0.098	0.134	0.886	0.098	0.204	0.886	0.113
Adj R^sq	0.169	0.869	0.094	0.130	0.869	0.094	0.201	0.869	0.109
F-stat	46.361^a	52.490^a	24.114^a	34.158^a	52.473^a	24.129^a	56.920^a	52.700^a	28.193^a
B & PLM chi^sq	2868.130^a	3316.310^a	3154.160^a
Hausman chi^sq		75.618^a		30.048^a		58.402^a
Final model	FEMod	FEMod	FEMod
No. Obs.	1336	1336	1336	1336	1336	1336	1336	1336	1336

Note: Figure in parentheses ( ) is standard error.

^a,b,cSignificance at 1%, 5% and 10% levels, respectively.

Source: Microfinance Information Exchange (MIX), Heritage Foundation’s Index and authors’ own calculations.

Table 5. Regression result on the financial efficiency of microfinance institutions.

	M1			M2			M3
Variable	PoOLS	FEMod	REMod	PoOLS	FEMod	REMod	PoOLS	FEMod	REMod
C	0.096	−1.323^a	−0.102	−0.672^a	−1.116^a	−0.955^a	−0.281^c	−1.096^a	−0.937^a
	(0.062)	(0.272)	(0.133)	(0.111)	(0.161)	(0.213)	(0.168)	(0.161)	(0.204)
MFI’s specific variables
lnROAA	−0.102^a	1.135^a	−0.087^a	−0.035^b	0.729^a	−0.006	−0.042^a	0.726^a	−0.013
	(0.013)	(0.184)	(0.032)	(0.015)	(0.204)	(0.034)	(0.015)	(0.204)	(0.032)
lnAGE	−0.109^a	0.057	−0.088^a	−0.131^a	−0.044	−0.132^a	−0.131^a	−0.035	−0.132^a
	(0.012)	(0.074)	(0.029)	(0.013)	(0.036)	(0.028)	(0.012)	(0.036)	(0.026)
lnTOA	0.003	0.014	0.011	0.010^b	−0.015^b	0.014^c	0.010^b	−0.013^b	0.014^c
	(0.004)	(0.016)	(0.008)	(0.004)	(0.006)	(0.008)	(0.004)	(0.006)	(0.008)
Macroeconomics variables
lnINF				0.024^a	0.002^c	0.006	0.026^a	0.001	0.005
				(0.007)	(0.001)	(0.004)	(0.007)	(0.001)	(0.004)
lnGDP				0.085^a	0.101^a	0.112^a	0.077^a	0.087^a	0.107^a
				(0.011)	(0.013)	(0.022)	(0.011)	(0.015)	(0.021)
Rule of law & Government size variables
lnPR							−0.093^a	0.011^a	0.009
							(0.030)	(0.004)	(0.016)
lnGI
lnGS
lnTB
R^sq	0.101	0.814	0.011	0.146	0.986	0.031	0.152	0.985	0.035
Adj R^sq	0.099	0.787	0.008	0.143	0.984	0.027	0.148	0.983	0.031
F-stat	49.992^a	30.151^a	4.736^a	45.477^a	469.569^a	8.511^a	39.768^a	444.976^a	8.000^a
B & PLM chi^sq	2641.850^a			2531.820^a			2447.520^a
Hausman chi^sq		53.964^a			58.178^a			92.902^a
Final model	FEMod			FEMod			FEMod
No. Obs.	1336	1336	1336	1336	1336	1336	1336	1336	1336
	M4			M5			M6
Variable	PoOLS	FEMod	REMod	PoOLS	FEMod	REMod	PoOLS	FEMod	REMod
C	0.323^c	−1.108^a	−0.914^a	−1.013	−1.774	0.183	−12.608^a	−0.803^c	−10.465^a
	(0.166)	(0.158)	(0.201)	(1.584)	(1.365)	(1.007)	(0.644)	(0.482)	(1.362)
MFI’s specific variables
lnROAA	−0.103^a	0.695^a	−0.015	−0.037^b	1.163^b	−0.004	−0.074^a	0.729^a	−0.039
	(0.017)	(0.201)	(0.030)	(0.016)	(0.490)	(0.034)	(0.014)	(0.204)	(0.031)
lnAGE	−0.132^a	−0.001	−0.132^a	−0.131^a	−0.029	−0.133^a	−0.070^a	−0.047	−0.081^a
	(0.012)	(0.037)	(0.025)	(0.013)	(0.105)	(0.028)	(0.012)	(0.036)	(0.026)
lnTOA	0.009^b	−0.012^b	0.014^c	0.010^b	0.003	0.013	0.004	−0.015^b	0.010
	(0.004)	(0.006)	(0.007)	(0.004)	(0.048)	(0.008)	(0.004)	(0.006)	(0.007)
Macroeconomics variables
lnINF	0.007	0.003^a	0.006	0.024^a	0.005	0.007^c	−0.002	0.002	0.006
	(0.007)	(0.001)	(0.004)	(0.007)	(0.004)	(0.004)	(0.006)	(0.001)	(0.004)
lnGDP	0.065^a	0.068^a	0.106^a	0.082^a	0.134^a	0.114^a	0.106^a	0.103^a	0.122^a
	(0.011)	(0.016)	(0.020)	(0.015)	(0.050)	(0.022)	(0.010)	(0.013)	(0.020)
Rule of law & Government size variables
lnPR
lnGI	−0.225^a	0.024^a	0.007
	(0.028)	(0.005)	(0.018)
lnGS				0.080	−0.040	−0.251
				(0.371)	(0.208)	(0.218)
lnTB							2.659^a	−0.071	2.124^a
							(0.142)	(0.103)	(0.299)
R^sq	0.185	0.984	0.037	0.146	0.815	0.032	0.325	0.986	0.071
Adj R^sq	0.181	0.982	0.033	0.142	0.788	0.028	0.322	0.984	0.067
F-stat	50.171^a	422.832^a	8.562^a	37.878^a	29.814^a	7.380^a	106.448^a	466.427^a	16.857^a
B & PLM chi^sq	2136.420^a	2529.440^a	2089.860^a
Hausman chi^sq		117.653^a		60.582^a		64.391^a
Final model	FEMod	FEMod	FEMod
No. Obs.	1336	1336	1336	1336	1336	1336	1336	1336	1336

Note: Figure in parentheses ( ) is standard error.

^a,b,cSignificance at 1%, 5% and 10% levels, respectively.

Source: Microfinance Information Exchange (MIX), Heritage Foundation’s Index and authors’ own calculations.