This study identifies the effects of capital structure on the financial performance of Microfinance Institutions (MFIs) in Bangladesh. A dataset of 187 MFIs developed by UK donor agencies with the collaboration of The Institute for Inclusive Finance and Development, InM was used to study the relationship between Capital Structure and Financial Performance of MFIs from Bangladesh. Panel data regression analysis was used for this study using the Random effect and Fixed effect models. Return on Asset (ROA), and Net Income to Expenditure (NIER) are used as measures of financial performance. The findings indicate that Equity to Asset Ratio (EAR), Debt to Loan Ratio (DTL), Risk, and Size are the factors that influence NIER. Furthermore, EAR, and DTL have a positive effect on ROA and Risk has a negative effect. The findings have implications for policymakers and management of MFIs for attaining sustainable financial performance with optimum debt and equity portfolios.
