ICT adoption, governance and microfinance efficiency in South Asia

This study investigates whether information and communication technology (ICT) improves microfinance institutions’ (MFIs) dual efficiency—financial sustainability and social outreach—and how governance conditions these effects in South Asia. Using panel data on 182 MFIs from six South Asian countries over 2009–2018, we measure time-varying efficiency with the DEA-based SBM-GML index, estimate the effects of ICT development and governance on MFI efficiency. Results show that ICT development, especially greater internet usage, significantly raises financial efficiency by reducing operating and transaction costs and also supports outreach expansion (more active clients and higher average loan size). The impact is strongly governance-contingent: once governance exceeds a critical threshold, ICT’s positive effect on financial efficiency is amplified, whereas under weak governance the social-efficiency gains from ICT are partially constrained. These findings imply that ICT-led improvements in microfinance are not automatic; policies should jointly expand affordable digital infrastructure and strengthen governance capacity to maximize both sustainability and inclusion in South Asia.