Title: Sustainability of microfinance institutions: the role of outreach and financial sustainability

Authors: Karam Pal Narwal; Manoj Kumar Yadav

Addresses: Haryana School of Business, Guru Jambheshwar University of Science and Technology (GJUS&T), Hisar, India ' Haryana School of Business, Guru Jambheshwar University of Science and Technology (GJUS&T), Hisar, India

Abstract: This paper aims to examine how selected outreach and financial indicators impact on the sustainability of Indian microfinance institutions. It adopts a quantitative approach based on the secondary data from conveniently sampled 40 microfinance institutions. A panel data technique is employed for model specification. It is shown that outreach and financial sustainability indicators affect to each other. Outreach indicators have a positive association with the profitability of microfinance institutions. Repayment levels of the loan have a positive impact on the outreach and negative impact on the financial sustainability. Microfinance institution may be focused on the repayment rate for attaining the level of sustainability. A clear balance may be in social objective and institution sustainability to ensure the sustainability of microfinance institutions is recommended. Studies on the trade-off between outreach and financial sustainability are limited especially in India. Its application added some precious characteristics in the microfinance sector.

Keywords: microfinance institutions; financial sustainability; outreach; social objectives; India; profitability; loan repayment levels; sustainable development.

DOI: 10.1504/IJFSM.2016.081896

International Journal of Financial Services Management, 2016 Vol.8 No.4, pp.350 - 365

Received: 13 Mar 2016
Accepted: 02 Sep 2016
Published online: 30 Jan 2017 *

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