Regulation Versus Outreach and Sustainability: A Study of the Performance of Microfinance Institutions in India

Ambika Pati

The IUP Journal of Bank Management, 2012, vol. XI, issue 4, 41-56

Abstract: Though research studies around the world provide some evidences of performance of Microfinance Institutions (MFIs) operating under different regulatory frameworks, a comprehensive study on the performance of Indian MFIs is lacking. In this paper, an attempt has been made to assess their performance in terms of outreach and sustainability by identifying the impact variables through regression models. For this purpose, data pertaining to 40 MFIs was sourced from the mixmarket.org for the years 2005-06 and 2009-10 to see if there is any shift in their performance and to identify the predictors. Though a perceptible change is noticed across many indicators of MFIs over the five years of the study period, regulation has not emerged as a statistically significant determinant variable of performance. Rather, the operating expenditure is found to be the predictor of sustainability and profitability of MFIs. This suggests that though regulation is required for proper functioning of this sector, a balanced and cautious approach is highly desirable from the regulators.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjbm:v:11:y:2012:i:4:p:41-56

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