Is Age a Criterion for Sustenance of Microfinance Institutions?

Abstract

Microfinance is defined as provision of financial services to low income clients. The institutions offering financial services and banking opportunities to the unbankable population are called as Microfinance Institutions (MFIs). The study aims to compare the MFIs of India and Bangladesh, two fast growing economies of the South Asian region of the world, based on the classification of their age as new, young and mature. Kruskal Wallis test is used to find which category has done better than other two categories on different financial performance indicators. The findings show that on the basis of age groups, mature MFIs have shown better performance in terms of breadth of outreach, return on assets, operational self-sufficiency, profit margin, total expense to assets, financial expense to assets, operating expense to loan portfolio, cost per borrower, loan per staff member, and risk coverage.