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Efficiency of Micro Finance Institutions in India: A Stochastic Distance Function Approach

Listed author(s):
  • Kumar, Nitin
  • Sensarma, Rudra

We examine the efficiency-outreach debate in the context of Indian Micro Finance Institutions (MFIs). We employ the stochastic distance function approach for 75 MFIs during 2004-2011. We find that there are significant inefficiency effects but efficiency is improving over time. Among the determinants of inefficiency, average loan balance per borrower and number of women borrowers appear to improve efficiency. This suggests that the efficiency-outreach debate is more nuanced than is presented in the literature and depends on the way outreach is defined. Profitability, size and leverage seem to increase efficiency whereas age of the MFI is associated with higher inefficiency.

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File URL: https://mpra.ub.uni-muenchen.de/81064/1/MPRA_paper_81064.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 81064.

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Date of creation: Jul 2017
Publication status: Published in Journal of Emerging Market Finance 2.16(2017): pp. 151-168
Handle: RePEc:pra:mprapa:81064
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