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Penetration of MFIs among Indian states: an understanding through macro variables

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  • Sougata Ray
  • Sushanta Mahapatra

Abstract

Purpose - The Indian microfinance industry witnessed one of the fastest growths in the recent times. However, the striking feature of this growth is that the Microfinance Institutions (MFIs) are concentrated only in some specific regions of the country. There is a huge geographical skew in the distribution of the MFIs. In this paper, an attempt has been made to explain these geographical skew by using the macro variables of the states. The objective of the study is to identify the causes for this regional disparity in the growth of MFIs. Design/methodology/approach - We try to explain the level of penetration of microfinance in the states by using regression models. Findings - Our analysis suggests that state-level macro factors are significant in explaining the geographical skew. MFIs in India have concentrated in states which are richer, have good rural infrastructure, but lack in adequate banking facility, and have low human capital. Originality/value - The study provides an insight which would help in framing the necessary regulations to ensure that MFIs operate in all regions of the country.

Suggested Citation

  • Sougata Ray & Sushanta Mahapatra, 2016. "Penetration of MFIs among Indian states: an understanding through macro variables," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 15(3), pages 294-305, September.
    • Handle: RePEc:eme:ijdipp:v:15:y:2016:i:3:p:294-305
    DOI: 10.1108/IJDI-05-2016-0030
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    References listed on IDEAS

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    1. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    2. Adam McCarty, 2001. "Microfinance in Vietnam - A Survey of Schemes and Issues," Finance 0110001, University Library of Munich, Germany.
    3. Mark Schreiner & Héctor Horacio Colombet, 2001. "From Urban to Rural: Lessons for Microfinance from Argentina," Development Policy Review, Overseas Development Institute, vol. 19(3), pages 339-354, September.
    4. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    5. Sriram M S & Kumar Radha, 2005. "Conditions in Which Microfinance has Emerged in Certain Regions and Consequent Policy Implications," IIMA Working Papers WP2005-05-03, Indian Institute of Management Ahmedabad, Research and Publication Department.
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    Cited by:

    1. Francis Awuku Darko, 2016. "Is there a mission drift in microfinance? Some new empirical evidence from Uganda," Studies in Economics 1603, School of Economics, University of Kent.
    2. Sunil Sangwan & Narayan Chandra Nayak, 2019. "Do outreach approaches differ between Self-Help Group-Bank Linkage and Microfinance Institution-based microfinance? Evidences from Indian states," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(1), pages 93-115, June.

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    More about this item

    Keywords

    Microfinance institutions; Macro variables; Penetration; Regional disparity; G210; E44; R5;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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