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Efficiency of Microfinance Institutions in India: A Stochastic Distance Function Approach

Nitin Kumar and Rudra Sensarma

Journal of Emerging Market Finance, 2017, vol. 16, issue 2, 151-168

Abstract: We examine the efficiency–outreach debate in the context of Indian microfinance 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 that 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. JEL Classification: G21, C51, C33 Disclaimer : The views expressed in the research article are solely of the authors and not of the organizations to which they belong. All the errors, omissions etc. if any, are the responsibility of the authors.

Keywords: Microfinance institutions; efficiency; stochastic distance function (search for similar items in EconPapers)
Date: 2017
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Working Paper: Efficiency of Micro Finance Institutions in India: A Stochastic Distance Function Approach (2017) Downloads
Working Paper: Efficiency of Micro Finance Institutions in India: A stochastic distance function approach (2015) Downloads
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