The Scale Validation of Amanah Ikhtiar Malaysia’s Microfinance Services and Household Socioeconomic Instrument

Households' socioeconomic outcomes play a crucial role in sustainable development. Both public and private organisations have introduced various microfinance schemes to address economic deprivation. Nevertheless, there is ongoing debate in the literature about the effectiveness of these strategies in improving household socioeconomic performance. Researchers continue to face challenges in identifying key factors that enhance the performance of low-income households, largely due to the absence of reliable measurement tools. This study develops and validates a scale specifically designed to capture the multifaceted effect of microfinance on household socioeconomic well-being. The research introduces measuring constructs for first-order constructs relating to variables such as microfinance services, household Entrepreneurial Competencies (EC), Financial Management Practices (FMP), and socioeconomic performance. Using Exploratory Factor Analysis (EFA) on data collected from low-income households engaged in microfinance programs in Malaysia, the study assesses the instrument’s reliability and validity. Findings ensure the potential of the validated measurement tool to evaluate the effectiveness of microfinance interventions. The results confirm that the developed instrument is valid and reliable for future studies on microfinance and household economic models.