This research examines the influence of microfinance services on the socioeconomic performance of Malaysian B40 households, which are considered vulnerable communities in Malaysia. Mainly, it explores the mediating role of entrepreneurial competencies and financial management practices in the relationship of microfinance services with households’ economic well-being, entrepreneurial success, and social wellbeing. Likewise, this research also examines the moderating role of microfinance institutions’ service efficiency in the success of microfinance services to improve households’ socioeconomic outcomes. The responses were collected from the participants of Amanah Ikhtiar Malaysia, the largest microfinance institution serving the low-income population of Malaysia. Employing the structural equation modelling approach, results show that microfinance financial services and non-financial services positively influence households’ socioeconomic performance through entrepreneurial competencies and financial management practices. On the other hand, microfinance financial services are also found to have significant direct influence on households’ socioeconomic performance. Further, results also indicate that microfinance institutions’ service efficiency positively moderates the influence of financial services to improve households’ socioeconomic performance. This is novel research that introduces human capital development as an underlying mechanism in the household economic portfolio model, suggesting that microfinance interventions develop human capabilities among their participants, which further assist them in the efficient management of financial and business affairs, thus, improving socioeconomic outcomes.

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’ socio-economic 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.

The main purpose of this study is to investigate the impact of microfinance services on the economic well-being of clients in Malaysia and to explore how the credibility of microfinance institutions moderates the relationship between microfinance services and economic well-being. The data was collected from clients of Amanah Ikhtiar Malaysia, the largest microfinance organization catering to low-income households in Malaysia for this study. The research applied measurement and structural models to analyze the data and test the formulated research hypotheses comprehensively employing structural equation modeling. The analysis results demonstrated a significant and positive impact of financial and non-financial microfinance services on the economic well-being of clients. Furthermore, the findings also revealed that the credibility of microfinance institutions plays a crucial role in augmenting the effectiveness of financial services in fostering economic success. In essence, this research suggests that the credibility of microfinance institutions strengthens the impact of financial interventions aimed at improving clients' economic status. These outcomes have significant implications for the design and implementation of microfinance programs in Malaysia emphasizing the importance of financial and non-financial services and the credibility of the institutions delivering them in positively influencing clients’ economic well-being.