Efficiency of Micro Finance Institutions in India: A Stochastic Distance Function Approach

Nitin Kumar and Rudra Sensarma

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the efficiency-outreach debate in the context of Indian Micro Finance Institutions (MFIs). We employ the stochastic distance function approach for 75 MFIs during 2004-2011. We find that there are significant inefficiency effects but efficiency is improving over time. Among the determinants of inefficiency, average loan balance per borrower and number of women borrowers appear to improve efficiency. This suggests that the efficiency-outreach debate is more nuanced than is presented in the literature and depends on the way outreach is defined. Profitability, size and leverage seem to increase efficiency whereas age of the MFI is associated with higher inefficiency.

Keywords: Micro Finance Institutions; Efficiency; Stochastic Distance Function (search for similar items in EconPapers)
JEL-codes: C33 C51 G21 (search for similar items in EconPapers)
Date: 2017-07
New Economics Papers: this item is included in nep-ban, nep-eff and nep-mfd
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Published in Journal of Emerging Market Finance 2.16(2017): pp. 151-168

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Related works:
Journal Article: Efficiency of Microfinance Institutions in India: A Stochastic Distance Function Approach (2017)
Working Paper: Efficiency of Micro Finance Institutions in India: A stochastic distance function approach (2015)
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