The Scale Assessment and Validation of Microfinance Services and Household Socioeconomic Model: Using Parallel and Exploratory Factor Analyses

Abstract

Households’ socio-economic outcomes are considered a significant component of sustainable development. In this regard, public and private organizations are constantly devising several microfinance and development strategies to tackle economic deprivation. There exists a conflict in the literature regarding the role of such a strategy in enhancing households’ socioeconomic outcomes. In addition, researchers are also struggling to identify crucial factors that could improve poor households’ socio-economic performance. However, the lack of established measuring instruments for various microfinance and households’ socio-economic factors is the major hurdle in conducting quality research. Hence, this study intends to develop and validate measurements for microfinance and households’ socio-economic model. By employing an Exploratory Factor Analysis (EFA) and Parallel Analysis as factor retention techniques, this research provides measuring constructs for microfinance financial services, business coaching, training programs, microfinance institutions’ efficiency, households’ entrepreneurial competencies, households’ financial management practices, and households’ socio-economic performance. Based on the results, it is proved that the developed instrument of the microfinance and households’ economic model is valid and reliable to be used in future related research.