Journal of Rural Development

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Determinants of Sustainability of Microfinance Sector in India


Affiliations
1 National Institute of Technology (NIT), Durgapur, India
2 Institute for Human Development, New Delhi, India
 

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Most of the Microfinance Institutions (MFIs) are facing the problem in maintaining the sustainability in their operation. Several studies have been conducted to determine the factors affecting the financial and operational sustainability of MFIs. However, there are not many studies conducted in this area in India. Therefore, this study was conducted to fill the gap. This study is based on quantitative research approach using Probit Regression model as the main data analysis technique. The study relied on nine years secondary data obtained from the mix-market database for 65 selected MFIs in India. The study found that average loan balance per borrower, size of an MFI, cost per borrower and yield on gross loan portfolio affect the operational sustainability of Indian MFIs significantly. Therefore, this study recommends microfinance institutions to increase their economies of scale which will reduce the cost per borrower.
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  • Determinants of Sustainability of Microfinance Sector in India

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Authors

Moususmi Singha Mahapatra
National Institute of Technology (NIT), Durgapur, India
Swati Dutta
Institute for Human Development, New Delhi, India

Abstract


Most of the Microfinance Institutions (MFIs) are facing the problem in maintaining the sustainability in their operation. Several studies have been conducted to determine the factors affecting the financial and operational sustainability of MFIs. However, there are not many studies conducted in this area in India. Therefore, this study was conducted to fill the gap. This study is based on quantitative research approach using Probit Regression model as the main data analysis technique. The study relied on nine years secondary data obtained from the mix-market database for 65 selected MFIs in India. The study found that average loan balance per borrower, size of an MFI, cost per borrower and yield on gross loan portfolio affect the operational sustainability of Indian MFIs significantly. Therefore, this study recommends microfinance institutions to increase their economies of scale which will reduce the cost per borrower.

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DOI: https://doi.org/10.25175/jrd.v35i3.119838