A study of the Efficiency of Microfinance Institutions in India Using Data Envelopment Analysis

Abstract

The role of microfinance institutions is to provide credit to the poor who have no access to commercial banks. A major challenge for microfinance institutions is that of financial sustainability, with several of them appearing to be often loss making. Recently, however, there has been a renewed focus on the financial sustainability and efficiency of microfinance institutions, which is essential for the we/I-being of the financial system in developing countries. This study examines the efficiency of microfinance institutions in India using a modified form of Data Envelopment Analysis. The data for the study was collected on a sample of thirty microfinance institutions in India from the Microfinance Information exchange (MIX). The results of the analysis indicate the inefficiencies in the microfinance sector.