The Microfinance Review

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Operational Sustainability and its Determinants:A Panel Data Analysis of Indian MFIs


Affiliations
1 Department of Commerce , Assam University, Silchar, India
     

   Subscribe/Renew Journal


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.
User
Subscription Login to verify subscription
Notifications
Font Size

  • Armendariz, B and Morduch, J (2005): “The Economics of Microfinance”, Massachusetts Institute of Technology, Cambridge, MA.

  • CGAP-Microfinance Consensus Guidelines www.cgap.org.

  • Kinde, B A (2012): “Financial Sustainability of Microfinance Institutions in Ethiopia”, European Journal of Business and Management, Vol. 4, No. 15.

  • Nurmakhanova, M and Kretzschma, G (2015): “Trade-off Between Financial Sustainability and Outreach of Microfinance Institutions”, Eurasian Econ Rev 5:231–250.

  • Pati, A P (2015): “Are Regulatory Microfinance Institutions of India better off than Non-Regulatory Ones? - A Comparison of Performance and Sustainability”, Paradigm, Vol. 19, No. 1, pp. 21-36.

  • Rahman, M A and Mazlam, A R (2014): “Determinants of Financial Sustainability of Microfinance Institutions in Bangladesh, International Journal of Economics and Finance, Vol. 6, No. 9.

  • Tehulu, T A (2013): “Determinants of Financial Sustainability of Microfinance Institutions in East Africa, European Journal of Business and Management, Vol. 5, No. 17.

  • Wambugu, F W and Ngugi, J K (2012): Factors Influencing Sustainability of Microfinance Institutions in Kenya: A Case of Kenya Women Finance Trust, International Journal of Innovative Research and Development, Vol. 1, No. 11.

  • Yaron, J and Manos R (2007): “Determining the Self-Sufficiency of Microfinance Institutions, Savings & Development, No. 2, pp 131-160.

  • http://www.business-standard.com

  • http://www.ifpri.org/topic/global-hunger-index


Abstract Views: 291

PDF Views: 2




  • Operational Sustainability and its Determinants:A Panel Data Analysis of Indian MFIs

Abstract Views: 291  |  PDF Views: 2

Authors

Joyeeta Deb
Department of Commerce , Assam University, Silchar, India

Abstract


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.

References