Untangling the skein: The impact of FinTech on social and financial performance in microfinance institutions

This paper examines the effect of Financial Technologies (FinTech) on the social and financial performance of Microfinance Institutions (MFIs) and investigates whether the digital infrastructure moderates this relationship. Using a sample of 300 MFIs across 58 countries from 2013 to 2019, a three-stage least squares (3SLS) regression analysis was conducted to estimate a system of simultaneous equations. The results indicate that FinTech initially exhibited a negative impact on social performance, while its effect on financial performance was statistically insignificant. However, upon introducing digital infrastructure as a moderating variable alongside FinTech, the impact of FinTech shifted to positive and significant across all performance measures. This suggests that a well-developed digital infrastructure enhances the positive influence of FinTech on both the social and financial performance of MFIs. The study provides empirical insights into the role of FinTech in shaping MFI outcomes, offering implications for practitioners and policymakers.