The main purpose of this study is to examine the impact of two dimensions of country governance namely: 1) voice and accountability; 2) political stability and absence of violence to the social efficiency and financial efficiency of microfinance institutions (MFIs). Besides, this study also investigates the potential of MFIs specific characteristics and macroeconomic that may influence MFIs' efficiency. The present study gathers data on a total of 142 MFIs from the Philippines and Indonesia over the period 2011 to 2017. Overall, the results implied that, during the period of the study, although the MFIs had been operating on a relatively optimal scale, they were managerially inefficient to exploit their resources to the fullest in the view of both social efficiency and financial efficiency. This information could be useful to several parties and have several implications for MFIs, policymakers, investors and researchers to improve the efficiency level of MFIs.

Purpose Microfinance institutions (MFIs) play a significant role in society to help low-income consumers that liaise with sustainable development goals. Therefore, the purpose of this paper is to examine the effects of two economic freedom components, namely, regulatory efficiency on business freedom and monetary freedom; and market openness on investment freedom and financial freedom. Their influence on the efficiency of MFIs in both social and financial ways is examined. Design/methodology/approach This study collected a total of 88 MFIs from Thailand and the Philippines for the years 2011 to 2017. The data envelopment analysis approach has been used to measure the MFIs’ efficiency level. Then, the ordinary least squares and generalised least square estimation methods serve to analyse the effects of economic freedom and other determinants on efficiency. Findings The results show that overall MFIs operate at an encouraging level. However, they were managerially inefficient when exploiting resources to achieve both social and financial efficiency. Therefore, MFIs should focus more on managerial operations to improve the level of efficiency. Results from panel regression analysis showed a mixed outcome for the relationship between economic freedom and MFIs’ efficiency both financially and socially. This suggested that different freedoms will result in different outcomes and significantly influence MFIs’ financial and social efficiency. Originality/value Regulatory efficiency and market openness are the vital aspects of economic freedom components that may significantly influence MFI’s performance specifically on social and financial efficiency. This study fills the research gap by examining the relationship between economic freedom components and specific MFIs’ social and financial efficiency, to ensure MFIs work to achieve sustainable development goals.