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Operational Sustainability and its Determinants:A Panel Data Analysis of Indian MFIs
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Of various financial inclusion measures adopted so far, microfinance is considered to be one of the most powerful tools. Thus, it is equally important to ensure sustainability of such institutions. For many years, the term sustainability was viewed to be a crucial issue for only profit-making entities. As for Microfinance Institutions (MFIs), sustainability was deemed ensured through concessional lending and subsidies from government and donors. The present study attempts to assess the operational sustainability of 54 MFIs from 2009 to 2014 based on two broad parameters, namely, operational self-sufficiency and outreach. Further, the study also attempts to identify the determinants of operational sustainability. A panel data regression model was employed on 30 MFIs for six years from 2009 to 2014 to identify the influence of selected variables on operational self-sufficiency. Return on assets, return on equity, operating expenses to gross loan portfolio and growth in gross domestic product were found positively and significantly influencing operational self-sufficiency, whereas debt-to-equity is found negatively and significantly influencing self-sufficiency.
Keywords
MFIs, Operational Self-Sufficiency, Outreach, Panel Data Regression, Sustainability.
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