<![CDATA[Purpose – This study examines the effect of liquidity and solvency on Islamic microfinance institution (IMFI) efficiency and tests whether productive financing distribution strengthens these relationships. Methodology – This study uses a quantitative explanatory design with survey data collected from 97 Islamic microfinance institutions in Central Java between March and May 2026. The data were analyzed using partial least squares structural equation modeling (PLS-SEM). The assessment covered indicator reliability, convergent validity, internal consistency, discriminant validity, common method bias, explanatory power, and bootstrapped path significance.Findings – Liquidity has a significant positive effect on efficiency, whereas solvency has no significant direct effect. Productive financing distribution significantly moderates both the liquidity and solvency efficiency relationships. These results show that financial health improves efficiency when liquid funds and capital strength support income-generating financing rather than remaining as passive buffers. Implications – Islamic microfinance managers should integrate liquidity planning, capital management, productive financing selection and repayment monitoring. Supervisors should support portfolio risk control, reporting discipline and managerial capacity building. Originality – Unlike prior Islamic microfinance studies that mainly examine direct financial ratios, outreach, or efficiency scores, this study positions productive financing distribution as a moderating mechanism. It clarifies when financial health becomes an efficiency-enhancing resource for small Islamic financial intermediaries]]>
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