**1. Introduction**

Financial services for an individual ameliorate inclusion and performing business activities for obtaining a smooth economy (Li et al. 2019). Organizational performance promotes good outcomes irrespective of size, type, or faith, but is achieved by good loan repayment rates. The self-employed destitute have strong capabilities and commitments to structure their living and the microfinance institutions (MFIs) extend the frontiers with small credits and other financial services such as insurance, policies, mutual funds, etc. (Alimukhamedova 2013), while the access to traditional banks for the same destitute has been difficult for financial advancement activities. MFI finances with low-security risks and has a critical role in the progress of the economic system in emerging countries by showing their significant financial services (such as group lending, self-monitoring, shortrepayment methods, etc.) to millions of poor households globally (Daley-Harris 2009; Hadi and Kamaluddin 2015) in addition with the digitalized services (Agrawal and Sen 2017). It is observed that MFIs emerged from traditional banks to calculate and function their administration based on the profit efficiency, operating costs, and returning capital constraints which leads to economical profit being more important than social outreach (Kar 2012). Although one or group of efficiency (financial, social, and technological) is important in the functioning of a financial organizations to sustain bankruptcy or shutting down. At a

**Citation:** Kolloju, Adithya Kiran, and Michele Meoli. 2022. Efficiencies of Faith and Secular Microfinance Institutions in Regions of Asia, Africa, and Latin America: A Two-Stage Dual Efficiency Bootstrap DEA Approach. *Economies* 10: 66. https://doi.org/10.3390/ economies10030066

Academic Editor: Andreia Dionisio

Received: 30 December 2021 Accepted: 8 March 2022 Published: 16 March 2022

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**Copyright:** © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

certain point, the financial, social, and technological efficiencies are interconnected. Few dimensions of MFIs (NBFC1, credit unions, micro-credits, rural banks, NGOs2) were taken into consideration for the influence of their services and functionalities. Few operate with the spirit of capitalism (private ownership) but always abide by the reserve bank guidelines.

The capital structuring for an MFI (faith or secular) is obtained from sources such as government subsidiaries, public-private investments (shareholders), debt capital, profits, and third-party donations (Tchuigoua 2015). Apart from the public and the commercial funders, both provide funds as a charity for certain types of microfinance organizations for global development (Cobb et al. 2016). The level of profits, revenues, ROA3, and ROE4 ratios from operating costs, loan size, cost per borrower, etc., describes the performance of an MFIs. For better sustainability of MFI, it is important to maintain the average returns from the clients on timely basis agreements. It is also important to merge the economic and social gaps for proper and smooth functionality (Liñares-Zegarra and Wilson 2018). The profit-based institutions extend links with capital markets to ensure maintaining profitability and high-rate efficiency. The traditional MFIs are profit-based because the drawn-out monetary usefulness is a higher priority than the social effort (Leite et al. 2019; Liñares-Zegarra and Wilson 2018; Schwarz et al. 2015).

We drew the financial data from the World Bank catalog with the Mix-market collaboration and the data were extracted from 25 countries with 127 microfinance institutions and similar data were used in several studies (Aggarwal et al. 2015; Leite et al. 2019; Navajas and Tejerina 2006; Sainz-Fernandez et al. 2018; Wijesiri et al. 2015, 2017). The dual efficiency is a technique to understand the organization's performances and may estimate by diverse variables while we considered financial and social variables that reflect the performance factors of each microfinance institution. The data envelopment analysis (DEA) (Charnes et al. 1978), is a non-parametric approach bootstrap method that analyses the sensitivity of measured efficiency score by decision-making units (DMUs) (Simar and Wilson 2007). The DMUs have non-specified measurable properties and are neither classified in categories nor groups of faith and secular but the assumption is made for all MFIs in the analysis.

It is necessary to explore the marginal changes and impact of environmental indicators on the dual efficiencies. Several studies (Lebovic 2004; Wijesiri et al. 2015) used a censored model to investigate the determinants of efficiency estimates. The Tobit regression truncated random effect method is preferred as the correlation exists with an error term for both input and output variables (Amemiya 1984), the censored regression is used to analyze the impact of indicators such as type, religion, and region on efficiency performances. It is believed that an indirect relationship exists between the social/economical factors with the organizational principles (type, region, and religion). The religion and region indicators are organized by faith, secular institutions by the life cycle of MFIs, and they were identified and represented by three regions (Asia, Africa, and Latin America). The straightforward time-series Tobit censored linear regression model is assumed with a minimum of two autonomous variables/indicators individually for dual efficiencies. The second stage regression exhibits the indicators over efficiencies, and it is significantly seen that faith-adopted MFIs show better social outreach than traditional institutions.

The study is organized in sections and the following literature (Section 2) describes the important classification that is concentrated to determine the efficiencies, the effect of efficiencies over the observatory variable on women in microfinance, religious performance, effectiveness. Section 3 has empirical literature followed with the data and Section 4 has the methodology, Section 5 has the results of the performances and impaction with the regression model. Section 6 has the discussion and conclusions.

#### **2. Literature Review**

Microfinance institutions serve the development of society assisting the poor with turning out to be little business visionaries by micro-credits/grants without accepting interest rates (faith-operated) or little interest rates (traditionally operated). The clustered faith-based institutions are differentiated with the functionalities. To strike the difference between outreach and poverty alleviation, the institutional performance varies on the technical operations, attractiveness, strategies, methodologies, etc., and these categories have importance depending on the secular-based microfinance institutions (SB-MFIs) or the faith-based microfinance institutions (FB-MFIs). The cross-country MFIs are some laid out privately but are regulated under government policies with suitable regulatory acts, credit information companies, Reserve/Central bank, and Microfinance Regulatory Authority. Loan portfolios, recovering activities, are managed by financial managers and legal teams, apart from tradition/religion, MFIs raise funds with savings mobilizations (Wijesiri et al. 2015), donations (with the risk of liquidity management, this is considered as the minimal investment), deposits, and other cumulative surpluses. Partially, few MFIs are controlled and managed by women with profiting terms and policies, this is considered as a business activity or entrepreneurial establishment. We further discuss the role of gender (women) in microfinance.
