Performance Analysis of Microfinance Institutions of India

This is a study of Microfinance Institutions-MFIs of India. It includes analysis of MFIs of India. This study includes analysis of performance of microfinance institutions with reference to both financial and non-financial ways. Performance of microfinance institutions is measured using four parameters, which are sustainability/profitability, outreach, operational and financial efficiency. Data is taken of 99 Microfinance Institutions of India from the Microfinance Information Exchange for a period of 11 years. Variables of this study are both in absolute and relative terms. The endogenous variables are Return on Assets and Return on Equity for sustainability, Number of Borrowers per Staff Member for operational efficiency, Cost per Borrower for financial efficiency, and Number of Active Borrowers for outreach. Panel data analysis is done after checking the assumptions of the model. Hausman Test is applied to find out the suitability of Fixed or Random Effect Model. Both random and fixed effect were found suitable for application. In addition to this descriptive analysis of the variables is also done. The results show that most of the variables used in the study are significant in outreach model; other than rank, financial revenue to assets ratio, portfolio at risk, deposits, and capital to assets ratio all other variables are significant in case of sustainability using ROA model and same variables are found insignificant in ROE model except financial expense to assets ratio; in financial efficiency model both significant and insignificant variables are found; and in case of operational efficiency all variables are found significant.