Do interest rate caps on microfinance loans result in higher MFI efficiency? A study of Indian MFIs using data envelopment analysis Online publication date: Mon, 08-Jul-2024
by Savita Shankar; Trishit Bandyopadhyay
International Journal of Business and Globalisation (IJBG), Vol. 37, No. 3, 2024
Abstract: A regulatory cap on interest rates on micro finance loans in India in 2011, imposed subsequent to a crisis in the state of Andhra Pradesh, is studied using data envelopment analysis. The research objective is to ascertain if the regulation was followed by improvements in efficiency of micro finance institutions (MFIs) during the period 2011 to 2015. Improvements in efficiency are important because they can bolster MFIs' sustainability and ability to expand outreach. It is found that in three of the four years studied, MFI efficiencies showed increases, while in one-year efficiencies remained constant. Moreover, the proportion of MFIs which were of optimal size was significantly higher in 2015. The paper also examined if the regulation led to increases in average MFI loan sizes. It was found that while average loan sizes showed an increase during the period studied, the growth rate was in line with the trend observed prior to the regulation.
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Business and Globalisation (IJBG):
Login with your Inderscience username and password:
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.
If you still need assistance, please email subs@inderscience.com
Our Blog 
Follow us on Twitter 
Visit us on Facebook