Social Performance Determinants of Global Islamic and Conventional Microfinance Institutions and Human Happiness

Abstract

The achievement of human happiness is an emerging issue in 21st century where mental health is gaining as much importance as physical health and financial issues. Therefore, the purpose of this research was to explore and compare the role that the social performance of global Islamic and conventional microfinance institutions play in achieving human happiness by using non-traditional indexes. Further, the study also checked the moderating role of institution size in this relationship. Results indicate that the social performance of both Islamic and conventional microfinance institutions is important to achieving human happiness. Institution size as a moderator has a negative impact on social performance of conventional microfinance institutions in achieving sustainable development due to the possibility of commercialization. In terms of policy recommendations, the results of this study present several policy directions for both Islamic and conventional institutions managers for both developed and developing countries. Both Islamic and conventional MFIs mangers should focus on social performance especially outreach to the poor women to achieve human happiness. The managers should realize that in the case of increasing the institution's size, social performance can be improved. This study also gives directions to the government, central bodies, and other regulatory authorities to develop policies for improving the social performance of both Islamic and conventional microfinance institutions to achieve human happiness. Central bodies must switch from using outdated metrics used in MF industry related to governance, auditing, and client protection to gauge development and progress to metrics that focus on happiness and well-being. This study has taken multiple indicators of social performance that are extensively discussed in MIX reports. For future studies; financial performance indicators can be included in the study.

JEL Classification: C1, D6, D9.

Keywords:

Social Performance, Islamic Microfinance, Microfinance, Human Happiness, Human Happiness Index