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

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.