Sustainability and Efficiency of Micro Finance Institutions – Evidence from Selected Listed Companies in India

Abstract

Financial inclusion means that delivering financial services to all needy people at an effective and efficient manner unconditionally, and at an affordable cost. Micro finance institutions are playing an imperative role in financial inclusion and societal development.  As part of financial inclusion it is envisaged that every person living in rural India should have access to finance.  Many micro finance institutions in India are striving towards this objective and are facing many challenges in providing finance for rural people. MFI are abstracted with the capital requirements and high NPA due to non collateral lending. It also involves high transactional cost. With the objective of serving the poor, MFI has to sustain them with profitability and expand their outreach. It is observed from the top five listed MFI in India, that the listed MFI has better capital adequacy ratio and financial performance as compared to non listed firms, and has enhanced outreach to rural Indians over the years.

Keywords: Financial inclusion, Financial Performance, Sustainability, Capital Adequacy ratio

JEL category: G23, G21