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Are Indian Microfinance Institutions Efficient? A Two-Stage Double Bootstrapped DEA Based Analysis

In: Financial Inclusion in Emerging Markets

Author

Listed:
  • Shailja Agarwal

    (Institute of Management Technology)

  • Pankaj K. Agarwal

    (Indian Institute of Management)

Abstract

Microfinance is an important tool for achieving financial well-being in society as its aim is to contribute to the financial inclusion of poor households and small businesses. However, their ability to contribute to financial well-being is limited by how efficient their operations are. The study examines technical efficiency of microfinance institutions in India using non-parametric double bootstrap Data Envelopment Analysis (DEA) for the period 2017–18. Our sample consists of all Indian MFI firms reporting their performance data voluntary to MIX database. Our main finding is that the MFIs achieve their social objectives efficiently if they are financially efficient too. We further investigate whether efficiency differs due to firm characteristics like ownership, size, age and leverage and find that Capital Structure and Profitability are most important determinants of social and financial efficiency. These results could inform policy on MFI funding and operations alike.

Suggested Citation

  • Shailja Agarwal & Pankaj K. Agarwal, 2021. "Are Indian Microfinance Institutions Efficient? A Two-Stage Double Bootstrapped DEA Based Analysis," Springer Books, in: Ananda S. & Dharmendra Singh (ed.), Financial Inclusion in Emerging Markets, pages 165-180, Springer.
    • Handle: RePEc:spr:sprchp:978-981-16-2652-4_8
    DOI: 10.1007/978-981-16-2652-4_8
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