While the main purpose of microfinance institutions (MFIs) is to provide the poorest segment of the population access to capital, it also aims at being profitable to ensure continuity. Achieving higher levels of profitability enables MFIs to achieve self-sufficiency and become less reliant on donors. For this, scholars and academics have been massively interested in identifying the main determinants that have a direct/indirect impact on MFIs’ profitability. However, given the diversity of findings and growing complexity of influencing factors, a systematic review is crucial to consolidate current knowledge, reveal consistencies and contradictions in the literature, and provide clarity on what drives profitability across varying contexts. In this regard, this contribution provides the state of the art by systematically reviewing the main determinants of MFIs’ profitability. The review distinguishes between firm-specific and non firm-specific determinants. Firm-specific factors include MFI characteristics (e.g., size, legal status, capital structure), loan portfolio variables (e.g., yield, risk), outreach levels, personnel productivity, and ESG strategies. Non-firm-specific determinants encompass macroeconomic variables, regulatory policies, market competition, and governance indicators. The analysis reveals that both internal and external factors significantly shape MFIs’ financial outcomes, but their impact varies based on regional, institutional, and temporal contexts. The findings have practical implications for MFI managers, donors, and policymakers to improve MFIs’ internal efficiency (e.g., optimizing loan structures and staff productivity) while adapting to external conditions (e.g., economic volatility and legal frameworks). The originality of this study lies in the identification of the various factors that influence the profitability of these institutions, uncovering literature gaps, and suggesting novel directions for future research.

Systematic review, Microfinance institutions, Profitability, Literature gap, Future research directions

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