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Dangers in Mismanaging the Factors Affecting the Operational Self-Sustainability (OSS) of Indian Microfinance Institutions (MFIs) - An Exploration into Indian Microfinance Crisis

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  • M Nadiya
  • Francisco Olivares-Polanco
  • T Radha Ramanan

Abstract

This paper identifies the factors affecting the operational self-sustainability (OSS) of Indian Microfinance Institutions (MFIs) using multiple regression analysis. It shows revenue generation factor, cost efficiency factor and growth factor to have a positive influence on the OSS of Indian MFIs. Adjusted impairment loan loss allowance ratio, a portfolio risk factor and average loan size per borrower, a development factor, are seen to have a negative influence on OSS of Indian MFIs. The results thus infer five significant factors that Indian MFI managers must concentrate on to enhance the OSS of their organizations. The authors then discuss how mismanaging these five factors can deviate an MFI from its social goal of poverty alleviation. The crisis in Indian microfinance industry is explored to unveil the dangers involved in mismanagement of these factors. The paper concludes by stating that it is imperative for Indian MFI managers to introspect about their lending and recovery practices, so as to ensure that they manage the factors affecting their OSS, without exploiting the poor clientele.

Suggested Citation

  • M Nadiya & Francisco Olivares-Polanco & T Radha Ramanan, 2012. "Dangers in Mismanaging the Factors Affecting the Operational Self-Sustainability (OSS) of Indian Microfinance Institutions (MFIs) - An Exploration into Indian Microfinance Crisis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(3), pages 448-462.
    • Handle: RePEc:asi:aeafrj:v:2:y:2012:i:3:p:448-462:id:772
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    Citations

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    Cited by:

    1. Hadžiahmetović Nejra, 2021. "Factors determining the operational self-sufficiency of microfinance institutions," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 7(2), pages 1-13, December.
    2. Abiodun Omidiji & Nives Botica Redmayne & Dimu Ehalaiye & Ernest Gyapong, 2024. "Internal audit in microfinance institutions‐ evidence from transitional and developing economies," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 32(1), pages 109-141, January.
    3. Ayi Gavriel Ayayi, 2012. "Microfinance: A Time to Deliberate," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(3), pages 445-447, July.
    4. Farhana Yasmin & Mst. Sharmin Sultana Sumi & Maliha Rabeta & Ummay Mahima Ima, 2024. "Defining Factors behind the Financial Sustainability of Microfinance Institutions (MFIs) of Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 14(6), pages 310-319, October.

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