Global Journal of Interdisciplinary Social Sciences

Abstract

Financial Efficiency of Indian Top Five Micro Finance Institutions

Dr. Radha Rani

Micro Finance Institutions (MFIs) are the main players in the micro finance space. In India, great disaster struck the Micro Finance Industry in Andhra Pradesh (state) by the way of suicides by helpless borrowers, since then there was murmurs about the efficacy of MFIs. MFIs performance is studied in terms of Operational Efficiency, Financial Efficiency, Risk Bearing Capacity and Long Term Efficiency. As far as overall Financial Efficiency is concerned, MIMOFINANCE stood first in position, SARALA is more efficient in maintaining Operational Efficiency and having Risk bearing capacity. In the case of Long term Efficiency none of the MFIs have satisfied both Indian and South Asian Bench marks. The selected MFIs do not differ in their Operating Efficiencies, Financial Efficiency, Long Term Efficiency significantly over the study period where as MFIs do differ in their Risk Bearing Capacity and their productivity. The ‘touch and move on’ method of expansion of services increases the sub-optimal services and may reduce the profitability of the MFIs. These institutions should be more ethical not only in disclosure of financial performance but also social performance. The RBI should initiate steps for increasing their sources of funds to MFIs because bank lending to MFIs came to a sudden halt .With the higher capital norm of Rs.15 crore, the small players as well as the MFIs performing in remote and backward areas find difficult for their investments in order to sustain their position in the competition.