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Microfinance is the provision of a comprehensive range of financial facilities such as loans, deposited, money transfers, payment services and insurance to low-income households and their micro enterprises, due to limited literature on evaluating the financial performance of microfinance banks. The objective of this paper to investigates the relationship between asset growth and equity multiplier on the financial performance of microfinance banks of Pakistan. Study considers two variables, which relate to the profitability (a dependent factor): ROA and ROE. The independent factor on the other hand, AG, and EM. For this purpose, total 9 microfinance banks of Pakistan are engaged with 10- year financial data from 2010-2019 that are comes under the supervisions of State bank of Pakistan. E-views software is used to revealed result by analysis different tests including the descriptive analysis, correlation analysis and panel square regression method with. Some authors suggest that asset growth and equity multiplier have positive impact on financial performance of banks, while some authors suggests that asset growth and equity multiplier have its negative impact on the financial performance of banks. This study suggest that asset growth has its significant positive relationship with return on asset and return on equity, while equity multiplier has its significant negative relationship with return on asset and return on equity, finally based on results we conducted that asset growth has its significant positive relationship on financial performance and equity multiplier has negative relationship on the financial performance of microfinance banks of Pakistan. The study is equally beneficial and useful for the future researchers and for the microfinance banks of Pakistan to improve their profitability by reducing the equity and increasing asset growth.
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