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

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  • Ambika Prasad Pati

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.

Suggested Citation

  • Ambika Prasad Pati, 2012. "Regulation Versus Outreach and Sustainability: A Study of the Performance of Microfinance Institutions in India," The IUP Journal of Bank Management, IUP Publications, vol. 0(4), pages 41-56, November.
    • Handle: RePEc:icf:icfjbm:v:11:y:2012:i:4:p:41-56
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    Cited by:

    1. Mira Nurmakhanova & Gavin Kretzschmar & Hassouna Fedhila, 2015. "Trade-off between financial sustainability and outreach of microfinance institutions," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 231-250, December.
    2. Niels Hermes & Marek Hudon, 2018. "Determinants Of The Performance Of Microfinance Institutions: A Systematic Review," Journal of Economic Surveys, Wiley Blackwell, vol. 32(5), pages 1483-1513, December.
    3. Aruna Balammal & R. Madhumathi & M.P. Ganesh, 2016. "Pentagon Performance Model of Indian MFIs," Paradigm, , vol. 20(1), pages 1-13, June.
    4. Jiali Jenna Tang & Shakil Quayes & George Joseph, 2020. "Microfinance institutions, financial intermediation and the role of deposits," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1635-1672, June.
    5. 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.
    6. Hermes, Cornelis & Hudon, M., 2018. "Determinants of the Performance of Microfinance Institutions: A Systematic Review," Research Report 2018008, University of Groningen, Research Institute SOM (Systems, Organisations and Management).

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