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Penetration of MFIs among Indian States: An Understanding Through Macro Variables

Author

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  • Sougata Ray

    (cef.up, University of Porto, Portugal and Amrita School of Business, Coimbatore, India)

  • Sushanta Kumar Mahapatra

    (Department of Economics, University of Bologna, Bologna, Italy and Amrita School of Business, Amrita University, Coimbatore, India)

Abstract

The Indian Microfinance Industry witnessed one of the fastest growths in the recent times. However, the sticking feature of the growth is that the Microfinance Institutions (MFIs) are concentrated in only some regions of the country. There is a huge geographical skew in the distribution of the MFIs. In this paper an attempt has been made to explain these geographical skew by using the macro variables at the state levels. The purpose of this study is to identify the causes for the regional disparity of the growth of MFIs. The analysis is likely to help in identifying factors which need attention for developing the MFIs in states which are lagging behind and also in framing necessary regulations which can ensure uniform growth of MFIs among all the states. The study suggests that state level macro factors are significant in explaining the geographical skew. MFIs in India have concentrated in states which are richer, have good rural infrastructure, lack adequate banking facility and have low human capital.

Suggested Citation

  • Sougata Ray & Sushanta Kumar Mahapatra, 2014. "Penetration of MFIs among Indian States: An Understanding Through Macro Variables," CEF.UP Working Papers 1401, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:cetedp:1401
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    References listed on IDEAS

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    1. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    2. Adam McCarty, 2001. "Microfinance in Vietnam - A Survey of Schemes and Issues," Finance 0110001, University Library of Munich, Germany.
    3. Mark Schreiner & Héctor Horacio Colombet, 2001. "From Urban to Rural: Lessons for Microfinance from Argentina," Development Policy Review, Overseas Development Institute, vol. 19(3), pages 339-354, September.
    4. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    5. Sriram M S & Kumar Radha, 2005. "Conditions in Which Microfinance has Emerged in Certain Regions and Consequent Policy Implications," IIMA Working Papers WP2005-05-03, Indian Institute of Management Ahmedabad, Research and Publication Department.
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    Cited by:

    1. Francis Awuku Darko, 2016. "Is there a mission drift in microfinance? Some new empirical evidence from Uganda," Studies in Economics 1603, School of Economics, University of Kent.
    2. Sunil Sangwan & Narayan Chandra Nayak, 2019. "Do outreach approaches differ between Self-Help Group-Bank Linkage and Microfinance Institution-based microfinance? Evidences from Indian states," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(1), pages 93-115, June.

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    More about this item

    Keywords

    Microfinance Institutions; Penetration; Regional disparity; Macro variables;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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