Welfare Impact Analysis of Microfinance Institutions of Karnataka, India

Performance analysis of microfinance institutions has to be based on the objectives of the institutions. Although the main objective of most microfinance institutions is to improve the welfare of the poor, there have been two approaches to achieve the Microfinance objective. While, the Welfare Approach measures success mainly by how well it fulfills the needs of the poorest in the short term, or poverty reduction, the Institutional Approach measures success by the sustainability of the institutions assuming that self-sustainable microfinance institutions are likely to contribute to income expansion and poverty reduction. This study examines the Welfare impact of services of Micro-finance Institutions (MFIs) of Karnataka, India. Primary data has been collected for the study from members of 18 MFIs operating in Karnataka. Using Factor analysis and one way ANOVA, we find important results in the context of welfare impact assessment and also conclude that MFIs had a positive impact on the welfare of the beneficiaries.