Microfinance Resilience: The Role of Organizational Characteristics in Navigating Post-Crisis Sustainability Challenges

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Anjali Prava Mishra, Debasis Pahi, Pruthiranjan Dwibedi, Antarjyami Sahu

Abstract

The microfinance sector in India has witnessed remarkable growth, marked by the proliferation of Microfinance Institutions (MFIs) of varying ages. This research endeavors to unravel the multifaceted dimensions through which the age of Indian MFIs contributes to their sustainable growth. In this paper, we empirically assess the performance and efficiency changes of 65 Indian MFIs during the period from 2010 to 2018. We employ a Data Envelopment Analysis (DEA) approach to evaluate three key aspects of efficiency: social efficiency (SE), financial efficiency (FE) and overall efficiency (OE). Additionally, we utilize the Malmquist index to gauge changes in MFIs' efficiency over time (Khan & Gulati, 2022). Efficiency estimated for the individual MFIs are regressed on a set of explanatory variables (Debt to Equity ratio, Return on Assets, Portfolio at Risk 90 Days, Capital to Total Assets Ratio, Cash to Total Asset and institute specific variable i.e. Age and Size) employing the fixed effect OLS regression model. We find a strong association between a Organizational Age and its financial and social efficiency. The results suggest that the size of MFIs are strongly affecting the technical efficiency of the firm. By examining the distinct trajectories of MFIs at different stages of maturity, this study aims to provide valuable insights that can inform strategic decisions, policy formulations, and sustainable development initiatives in the microfinance landscape.

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Anjali Prava Mishra, Debasis Pahi, Pruthiranjan Dwibedi, Antarjyami Sahu. (2024). Microfinance Resilience: The Role of Organizational Characteristics in Navigating Post-Crisis Sustainability Challenges. European Economic Letters (EEL), 14(1), 1968–1978. Retrieved from https://www.eelet.org.uk/index.php/journal/article/view/1339
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