Financial efficiency versus social outreach of Indian micro-finance institutions
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The efforts of micro finance institutions to improve financial profitability and attract funding from the market may not necessarily conflict with the outreach objective of empowering the poor. In fact, a better managed financially sound institution may promise a more sustainable effort toward outreach falsifying the occurrence of the trade-off between outreach and financial profitability. The study analyses the trends in financial indicators reflecting portfolio risk, financial efficiency, productivity and outreach for microfinance institutions in India. The objective of the study is to examine the association between financial performance and outreach .The MIX market data on 46 micro finance institutions for 2005 to 2014 is used for the analysis. The panel data method with fixed effect model is applied to adjust for the heterogeneity within the sector. The present study, finds no evidence of the trade-off between efficiency and outreach objectives in India. The results of the study are important for the investors and policy makers as it provides evidence that increasing outreach will not adversely affect the financial health of the micro finance institutions if they are operationally efficient and productive.
- GIPE Working Papers