Contact Us

For Marketing, Sales and Subscriptions Inquiries
Rockefeller Center, 45 Rockefeller Plaza
20th Flr Unit #5, New York, NY 10111
United States

Conference List

The Economics and Finance Letters

December 2020, Volume 7, 2, pp 276-288

What Explains the Overwhelmingly Positive Perception towards Microfinance Institutions? Application of Firth’s Logistic Regression in a Small Sample

Shankar Ghimire


Anna Valeva


Rong Zheng

Shankar Ghimire 1 ,

Anna Valeva 2
Rong Zheng 1 
  1. Assistant Professor, School of Accounting, Finance, Economics, and Decision Sciences Western Illinois University 1 University Circle, Macomb, IL, USA. 1

  2. Associate Professor, School of Accounting, Finance, Economics, and Decision Sciences Western Illinois University 1 University Circle, Macomb, IL, USA. 2

Pages: 276-288

DOI: 10.18488/journal.29.2020.72.276.288

Share :

Article History:

Received: 16 September, 2020
Revised: 01 October, 2020
Accepted: 09 October, 2020
Published: 22 October, 2020


This paper focuses on analyzing small-sample business survey data. We survey 129 businesses in Nepal, where a majority of businesses express an overwhelmingly positive perception towards microfinance institutions (MFIs). The survey focuses mainly on how businesses perceive the services provided by local MFIs. In order to address the bias in maximum likelihood estimation in the context of small sample size, we utilize Firth’s adjusted maximum likelihood estimation procedure in the application of logistic regression. The results show that it is the borrowing of a loan from an MFI, not the actual business performance, which influences a business owner’s perception towards the role of MFIs in various aspects of rural development. While there is no strong evidence of the MFI loans helping with the actual business performance, and thereby influencing the perceptions, we discuss the potential benefits of owning a business that may be contributing to the positive perceptions towards the institutions with which they are associated. These findings have important implications from the managerial perspective of both MFIs and governing institutions in developing countries.
Contribution/ Originality
This study documents how businesses express positive perception towards MFIs because of their membership, not necessarily because they have more favorable business outcomes. Methodologically, the paper uses Firth’s logistic regression to address the bias present in maximum likelihood estimates computed from a small sample, something common in microfinance studies.


Microfinance, Microfinance institutions, Small sample, Firth’s logistic regression, Visualization, Mosaic (Marimekko) plot.


Aoki, C., & Pradhan, P. (2013). Impact of microfinance services on socio-economic empowerment of the women’s group in Nepal. Geography of Governance: Dynamics for Local Development, 1, 01-10.

Armendáriz, B., & Morduch, J. (2010). The economics of microfinance. MIT Press.

Ashe, J. (2002). PACT's women's empowerment program in Nepal: A savings-and literacy-led alternative to financial building. Journal of Microfinance/ESR Review, 4(2), 137-162.

Banerjee, A. V. (2013). Microcredit under the microscope: What have we learned in the past two decades, and what do we need to know? Annual Review of Economics, 5(1), 487-519. Available at:

Banerjee, A., Duflo, E., Glennerster, R., & Kinnan, C. (2015). The miracle of microfinance? Evidence from a randomized evaluation. American Economic Journal: Applied Economics, 7(1), 22-53.

Carter, T. C., Ye, Z., Ivacic, L. C., Budi, N., Rose, W. E., & Shukla, S. K. (2020). Association of variants in selected genes mediating host immune response with duration of Staphylococcus aureus bacteremia. Genes & Immunity, 20, 240-248. Available at:

Cheston, S., & Kuhn, L. (2002). Empowering women through microfinance. Draft, Opportunity International, 1-64. Retrieved from:

Copestake, J., Bhalotra, S., & Johnson, S. (2001). Assessing the impact of microcredit: A Zambian case study. Journal of Development Studies, 37(4), 81-100. Available at:

Cox, D. R., & Snell, E. J. (1968). A general definition of residuals. Journal of the Royal Statistical Society: Series B (Methodological), 30(2), 248-265. Available at:

Firth, D. (1993). Bias reduction of maximum likelihood estimates. Biometrika, 80(1), 27-38.

García-Pérez, I., Fernández-Izquierdo, M. Á., & Muñoz-Torres, M. J. (2020). Microfinance institutions fostering sustainable development by Region. Sustainability, 12(7), 2682. Available at:

Ghimire, S., Rigatti, T., & Sexton, N. (2017). Effect of credit cooperatives in employment generation: Evidence from rural Nepal. Journal of Development Innovations, 1(1), 29-44.

Ghimire, S., Clifford, D., & Costa, G. (2019). Do microfinance institutions help with business expansion? Evidence from Rural Nepal. Academy of Economics and Finance Journal, 10, 15-24.

Gutiérrez-Nieto, B., & Serrano-Cinca, C. (2019). 20 years of research in microfinance: An information management approach. International Journal of Information Management, 47, 183-197. Available at:

Heinze, G., & Puhr, R. (2010). Bias-reduced and separation-proof conditional logistic regression with small or sparse data sets. Statistics in Medicine, 29, 770 - 777. Available at: 10.1002/sim.3794.

Heinze, G., & Schemper, M. (2002). A solution to the problem of separation in logistic regression. Statistics in Medicine, 21(16), 2409-2419.

Hulme, D. (2000). Impact assessment methodologies for microfinance: theory, experience and            better practice. World Development, 28(1), 79-98.

Khandker, S. R. (2005). Microfinance and poverty: Evidence using panel data from Bangladesh. The World Bank Economic Review, 19(2), 263-286. Available at:

Kulkarni, V. S., Azam, M. S., & Gaiha, R. (2017). Credit, microfinance, and empowerment.               In Microfinance for Entrepreneurial Development (pp. 127-152). Cham: Palgrave Macmillan.

Magalhães, T. M., Gómez, Y. M., Gallardo, D. I., & Venegas, O. (2020). Bias reduction for the marshall-olkin extended family of distributions with application to an airplane’s air conditioning system and precipitation data. Symmetry, 12(5), 1-14.

McKenzie, D. (2012). Beyond baseline and follow-up: The case for more T in experiments. Journal of development Economics, 99(2), 210-221.

Melik, J. (2010). Microcredit 'death trap' for Bangladesh's poor.: Business Daily, BBC World Service.

Morduch, J., & Haley, B. (2002). Analysis of the effects of microfinance on poverty reduction. New York: NYU Wagner Working Paper, 1014.

Ngala, C. O. (2017). Microfinance and income levels of AIDS affected households: A Quasi-experimental survey. Journal of Financial Economics, 5(2), 50-60.

Oluyombo, O. O., & Iriobe, G. O. (2017). Microfinance impact assessment methodologies: Is it qualitative, quantitative or both?. In Microfinance for Entrepreneurial Development (pp. 153-168). Cham: Palgrave Macmillan.

Peters, C. (2017). Microfinance and female group action in Bangladesh. Review of Development Economics, 21(1), 21-42. Available at:

Quinones, B., & Remenyi, J. (2014). Microfinance and poverty alleviation: Case studies from Asia and the Pacific: Routledge.

Rainey, C., & McCaskey, K. (2015). Estimating logit models with small samples. Austin, Texas: Texas A&M.

Rajbanshi, R., Huang, M., & Wydick, B. (2015). Measuring microfinance: Assessing the conflict between practitioners and researchers with evidence from Nepal. World Development, 68, 30-47. Available at:

Sharma, P. R. (2007). Micro-finance and women empowerment. Journal of Nepalese Business Studies, 4(1), 16-27.

Tuman, J. P., & Erlingsson, H. (2020). The determinants of Chinese Foreign direct investment flows in Mexican States, 2004–2014. Latin American Policy, 11(1), 103-125.

Vanroose, A. (2016). Which factors drive the regional expansion of microfinance institutions? Evidence from Peru. Journal of International Development, 28(7), 1104-1122.

Weiss, J., & Montgomery, H. (2005). Great expectations: Microfinance and poverty reduction in Asia and Latin America. Oxford Development Studies, 33(3-4), 391-416. Available at:


Google Scholor ideas Microsoft Academic Search bing Google Scholor


This study received no specific financial support.

Competing Interests:

The authors declare that they have no competing interests.


All authors contributed equally to the conception and design of the study.

Related Article

( 1 ) Contracting Out: What Works, What Doesn’t and Why?
( 2 ) Acquisition of Personal Assets Through Loan Bank and Commercial Credit: What’s the Best Option?
( 3 ) Technological Innovation in Central and Eastern Europe: What’s the Contribution of Innovation Policy?
( 4 ) What Drives Banking Stability? Empirical Evidence from ECOWAS Countries
( 5 ) What are the Contextual Influences of Bank Criminality in Osun East Senatorial District?
( 6 ) Management of The CFA Franc: What are the Fundamentals of the Real Exchange Rate in West African Economic and Monetary Union (WAEMU)?
( 7 ) What Explains the Overwhelmingly Positive Perception towards Microfinance Institutions? Application of Firth’s Logistic Regression in a Small Sample
( 8 ) Central Bank Independence and Economic Growth of Ghana: What Inflation and GDP Per Capita Growth Rates Matter?
( 9 ) Local Governments and the Conundrum of Service Delivery in Nigeria: What Policy Implications?
( 12 ) The Importance of Public Administration Towards Achieving Good Governance for Positive National Development by Using SmartPLS 3
( 14 ) Awareness and Perception of Muslim Consumers on Halal Cosmetics and Personal Care Products
( 15 ) Managing Public Perception towards Local Government Administration
( 16 ) Perception of Professional Accountants about the Application of Artificial Intelligence (AI) in Auditing Industry of Bangladesh
( 17 ) Differences in Business Ethics Perception: A Developing Country Perspective
( 19 ) Analysis of Demographic Factors on Perceptions of Inventory Managers towards Healthcare Performance
( 20 ) An Enquiry into the Contributions of Microfinance Institutions Towards the Development of Small Scale Business in Nigeria
( 21 ) Quality Management Practices towards Customer Satisfaction in Local Authority Public Services Website
( 23 ) A Factor Analysis Approach Towards a Study of the Factors Affecting Students’ Choice of Higher Education Institution: A Case Study of a Private Institution (Twintech International University College of Technology)
( 25 ) Conceptualisation of Lack of Discipline and Probity as the Main Cause towards Good Governance Practice
( 26 ) Assessing the Perceived Value of Customers for being Satisfied towards the Sustainability of Hypermarket in Malaysia
( 27 ) Effect of Brand Enhancement on Buying Behavior towards the Sport Sponsorship Companies in Riyadh, KSA
( 28 ) Self-Efficacy and Entrepreneurial Mindset: Towards Societal Re-Engineering
( 29 ) Developing a Conceptual Model for Antecedents of Resistance to Change towards Sustainable Construction Practices
( 30 ) Towards a Proposal of a Local Authority Model Based on the Systemic Approach
( 31 ) A Process Model for Conformance of Health Information Systems: Towards National Interoperability
( 34 ) Fear of Covid-19 and Intentions towards Adopting E-Health Services: Exploring the Technology Acceptance Model in the Scenario of Pandemic
( 35 ) Economic and Noneconomic Forces on Remittance Receiving: A Panel Analysis of Top Remittance Sending Countries towards Bangladesh
( 37 ) Impact of Microfinance Lending On Economic Growth of Third world Nations: Study of Nigeria
( 38 ) Efficiency of Microfinance (MF) Institutions in Bangladesh: A Study on Top 10 MF Institutions
( 41 ) Contemporary Approach to Enhanced Road Transport System in Nigeria Through the Application of It-Based (Online) Bus Ticketing and Payment System
( 42 ) Study of the Relationship between Economic Growth and Inflation: Application to the Countries of the South Side of the Mediterranean: A Panel Data Approach
( 43 ) A Negative Rational Pigs Game and its Applications to Website Management
( 44 ) Construction and Application of Water Resource Accounting Information System in Taiwan
( 45 ) Satisfaction with Applications Fuels the Growth of Mobile Wallet Use in Thailand
( 46 ) Estimating the Economic Determinants of Technical Efficiency of Bioenergy in EU-28: An Application of Tobit Analysis
( 49 ) Research on the Construction and Application of Chinese Enterprises Overseas Port Investment Confidence Index Based on D-S Evidence Theory
( 51 ) On the Prediction of the Inflation Crises of South Africa Using Markov-Switching Bayesian Vector Autoregressive and Logistic Regression Models
( 54 ) Health Care Outcomes, Malnutrition and Food Security in Southern Africa Development Community: A Quantile Regression Approach
( 55 ) Problems of Bilateral Trade Deficit between Bangladesh and India: A 2SLS Regression Analysis
( 57 ) Some Non-Linear Problems in Accounting and Finance: Can we Apply Regression?