A New Perspective on Performance in Indian Microfinance Institutions

Abstract

With the massive growth in microfinance sector, the importance of performance measurement in microfinance institutions (MFIs) has prominent during the last decade. With an objective of commitment to dual mission, the Indian MFIs witnessed a series of rise and fall and subjected to mission drift. Thus redefining the performance is the prime objective of this study. Data gathered from 252 MFIs irrespective of their legal status. Factors for performance were identified through literature and were validated empirically. This research considered both the financial and social dimensions of performance unlike the earlier studies. Financial performance is described by profit margin, return on assets and portfolio at risk whereas social performance consists four factors namely Information disclosure (INFDIS), Mission adequacy (MISADEQ) and Community participation (COMPART). This study can be a useful bench-marking tool for practitioners to monitor and improve the MFI performance. The study has unique value to microfinance literature, both from theoretical and managerial perspectives.