Efficiency Determinants of Microfinance Institutions in India: An Indicative DEA Approach

Microfinance Institutions provide financial support to the deprived sections of the society, who are unable to receive formal banking facilities, and thus is considered an integral part for developing an economy. Talking about India, where till date a large mass of population is poor, uneducated, deprived of formal banking services, Microfinance Institutions works as bridge in filling up the gap between such underprivileged population and the formal banking system. Recently the studies on efficiency of Microfinance institutions have received wider attention. Therefore, it is felt relevant to study the efficiency of such institution in Indian context. Besides efficiency, this paper also attempts to identify the determinants of efficiency and specifically answers whether 'sustainability' has any significant impact on efficiency. Relevant data are collected through secondary source from thirty-one Indian Microfinance Intuitions and non-parametric Data Envelopment Analysis (DEA) is used for gauging the efficiency, thereafter, tobit regression is used to identify the determinants of efficiency.