The Microfinance Review

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Institutional Analysis of Microfinance Institutions (MFIs):Status and Measures for Wider and Effective Outreach


Affiliations
1 Centre for Research on Financial Inclusion and Microfinance (CRFIM), India
2 Bankers Institute of Rural Development, Lucknow, India
     

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The Indian microfinance sector is witnessing a period of high growth phase. With increased capital inflows and easy availability of loans from banks, MFIs may be under pressure to perform better. This opens up the debate on whether the growth in the sector is sustainable or is it just a signal of the crisis like the one happened in 2010. This paper examines some of the pertinent issues related to the high growth, namely, regional concentration, robustness of credit appraisal, drivers of growth, mission drift, profitability, product and process innovations and responsible financing. Using regression analysis on the data available since 1996 with Microfinance Information Exchange (MIX), the paper also analyses the determinants of the profitability and efficiency of Indian MFIs. On the basis of the findings, the paper makes suitable suggestions for the wider and effective outreach of the Indian MFIs.


Keywords

Microfinance, Microfinance Institutions (MFIs), Outreach, Regional Concentration, Portfolio Quality, Drivers of Growth, Responsible Financing.
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  • Institutional Analysis of Microfinance Institutions (MFIs):Status and Measures for Wider and Effective Outreach

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Authors

Bhawani Singh Rathore
Centre for Research on Financial Inclusion and Microfinance (CRFIM), India
D. V. Deshpande
Bankers Institute of Rural Development, Lucknow, India

Abstract


The Indian microfinance sector is witnessing a period of high growth phase. With increased capital inflows and easy availability of loans from banks, MFIs may be under pressure to perform better. This opens up the debate on whether the growth in the sector is sustainable or is it just a signal of the crisis like the one happened in 2010. This paper examines some of the pertinent issues related to the high growth, namely, regional concentration, robustness of credit appraisal, drivers of growth, mission drift, profitability, product and process innovations and responsible financing. Using regression analysis on the data available since 1996 with Microfinance Information Exchange (MIX), the paper also analyses the determinants of the profitability and efficiency of Indian MFIs. On the basis of the findings, the paper makes suitable suggestions for the wider and effective outreach of the Indian MFIs.


Keywords


Microfinance, Microfinance Institutions (MFIs), Outreach, Regional Concentration, Portfolio Quality, Drivers of Growth, Responsible Financing.

References