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Sustainability index of micro finance institutions (MFIs) and contributory factors

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Title Sustainability index of micro finance institutions (MFIs) and contributory factors
 
Creator BHANOT, D
BAPAT, V
 
Subject MICROFINANCE INSTITUTIONS
PERFORMANCE
OUTREACH
Sustainability
Microcredit
TOPSIS
Microfinance institutions
Sustainability index
 
Description Purpose - The purpose of this paper is to conceptualize the sustainability of micro finance institutions (MFIs) in a holistic manner. The idea is to create an index of sustainability for MFIs which includes financial and outreach aspects of sustainability. Further, it also discerns the factors which contribute to high (low) sustainability scores of MFIs. Design/methodology/approach - Data on Indian MFIs was collected from Microfinance Information Exchange database. Using the technique of order preference by similarity to ideal solution (TOPSIS), an Index of sustainability is built by aggregating multiple indicators (operational self-sufficiency ratio, the average loan balance per borrower and the number of active borrowers) to arrive at composite sustainability score of MFIs. Contributory factors of sustainability were identified using a multiple regression model. Findings - The sustainability score for MFIs ranges from a maximum score of 0.80 to a minimum of 0.26. Gross loan portfolio, No. of borrower per staff member, portfolio at risk > 30 days and return on assets, are significant contributors to sustainability scores of Indian MFIs. Practical implications - The index of sustainability is a useful tool to rank the MFIs on a multidimensional construct of sustainability. The study also helps to unravel factors that significantly contribute to sustainability of Indian MFIs. Originality/value - This study is novel in its attempt to measure sustainability in a holistic fashion by focussing not just on the financial performance of the MFI but also on outreach dimensions. It is also unique in its approach to adopt a multi criteria decision-making technique of TOPSIS to measure sustainability of Indian MFIs.
 
Publisher EMERALD GROUP PUBLISHING LIMITED
 
Date 2016-01-15T08:49:18Z
2016-01-15T08:49:18Z
2015
 
Type Article
 
Identifier INTERNATIONAL JOURNAL OF SOCIAL ECONOMICS, 42(4)387-403
0306-8293
1758-6712
http://dx.doi.org/10.1108/IJSE-01-2014-0001
http://dspace.library.iitb.ac.in/jspui/handle/100/18203
 
Language en