*2.2. Religion Performance and Effectiveness*

Religion rehearses impact and changes the human mind despite literacy (Barro and Mccleary 2003). Non-profit and regional MFIs primarily focus on developments in poverty alleviation. On the other hand, faith MFIs follow the community and religiously implemented principles and the results are more explored from the conviction-based institutions. In Islamic law, there is a prohibition to apply interest rates on loans (Imam and Kpodar 2016) and there are more potential in attaining social performance with counterparts with conventional organizations, and fundings are made with profits (Fersi and Boujelbéne 2016). Catholic microfinance institutions are better with financial performance in developing efforts (Mersland et al. 2013). It is empirically analyzed that women are more concerned with religious practices and ethics (Gyapong et al. 2021). The religious institutions are risk aversion and have low stock returns. In an Islamic country such as Bangladesh, social efficiency is 22% more than financial efficiency (Khan and Sulaiman 2015; Mia and Govindaraju 2016). We took the religion factor (irrespective of belief) as a dependent variable to differentiate the efficiencies socially and financially with profit/non-profit microfinance organizations.

The faith-based institutions follow the principles imposed by their religion and run administration to reach social and financial objectives. In countries such as Pakistan, Afghanistan, Bangladesh, and Middle Eastern countries, religion (Islam) is very important and treated in almost every activity. Mansori et al. (2020) collected questionaries from each Muslim and the gender classification (majority men have favor towards religion) showed importance. Spotted the difference in the risks between FB-MFIs and conventional Islamic MFIs cross-sectionally from the period 1998–2014 from the MIX database, the results show financial stability with SB-MFIs with low risk, evidence from OSS regression. The DEA-CRS5 analysis on 72 MFIs (NGOs and NBFIs) in MENA regions where MFI performances in Islamic nations are significant socially and financially, and these efficiencies are concerning to age (Mature, Young, and New) (Ben Abdelkader and Mansouri 2019). It is feasible to identify institutions and Table 1 shows the institution type with the religious status of each country. The background and historical analysis are perfectly performed to explore the religious status of the microfinance institution itself, it is observed many MFIs are integrated with Vision fund in Latin American regions (Catholic), and East Asian countries.

**Table 1.** Microfinance country, type, and religious status.


Source: Mix Market, Background Historical status of MFIs.

#### **3. Research Design**

#### *3.1. Research Questions*

The research questions are developed in two parts:

1. To determine the social and financial efficiency of 129 cluster MFIs (faith and secular) with a frontier non-parametric methodology (Simar and Wilson 2007; Seiford and Zhu 2014; Wijesiri et al. 2015). This helps to identify the microfinance status in established countries;

2. To determine the effect of external variables on these efficiency variables through both cluster<sup>6</sup> and two-model<sup>7</sup> groups, the time series as the Tobit regression model (Wijesiri et al. 2015). This helps to explore which variable can affect the MFI performance.
