A Study on Financial Performance of MFIs in India

Abstract

Microfinance initially has been a form of voluntary help to most deprived population. However, today it represents a market solution to mitigation of poverty and acts as a development and economic tool in bringing about financial inclusion in India.  Microfinance has emerged as a viable alternative to reach the hitherto unreached for their social and economic empowerment through social and financial intermediation. The institutions that are providing microfinance services such as savings, credit, insurance and remittance services to poor are called Microfinance Institutions (MFIs). The study aims at analyzing the financial performance of MFIs in India. The data have been collected from the Microfinance Information Exchange from the fiscal year 2007 to 2011. The statistical tools, namely, Descriptive statistics and growth rates have been used for analyzing the data.. In terms of overall financial performance, Indian MFIs has better ROE and OSS. Indian MFIs have exhibited higher financial revenue by assets, the yield on gross portfolio (nominal) and lower operating expense by assets, but still it couldn't cover the total expense and financial expenses. In fact, Indian MFIs have revealed better efficiency and productivity as measured by operating expense by loan portfolio, average salary by GNI per capita and loans per staff members.