Total Factor Productivity of Microfinance Institutions in India Using Malmquist Approach

Abstract

The micro finance institutions (MFI) are the key drivers in the development of a country as they provide financial services to poor and unbanked on a sustainable basis. The rationale of this paper is to measure productivity changes selected in MFIs from 2011 to 2017 post sector crisis period, using the Malmquist productivity index (MPI) method. Further the study also aimed to examine the reasons for decline in total factor productivity of sample MFIs in India. The empirical findings indicate that the sample MFIs total factor productivity change was found to be fluctuating throughout the period of the study and reported overall productivity regress in the study period. The study reveals also that the decline in total factor productivity of selected MFIs in India was mainly due to the technological change. Hence findings revealed that there is a need for technological up-gradation and good management practices overall, to increase the productivity in course of time.