Microfinance Institutions’ Operational Infrastructure in India: Assessing the Efficiencies through OLS Model

Abstract

This study attempts to examine the operational efficiency of thirty-two microfinance institutions in India. Operational efficiency in microfinance institutions refers to how well microfinance institutions allocate the input resources. Since the study is an exploratory nature, therefore, the data are collected from mix market on annual basis. It covers the seven-year period ranging from 2005-06 to 2012-13. A panel data technique is employed as the key analytical framework.From the statistical analysis, it may be observed that portfolio at risk and borrower per staff member has positive impact on the operational efficiency of microfinance institutions in India. The cost per borrower of MFIs has negative impact on its operational efficiency. The results of study put forward that cost efficient managers of MFIs are superior in managing their loan borrowers and appropriately monitoring MFIs operational costs. Moreover, operational efficiency level of microfinance institutions is supportive in achieving the economies of scale and reduces costs. On the other hand, the future directions may offer an opportunity of public private partnership in augmenting MFIs in India.