Financial and Social Orientations of Microfinance Institutions in India

Abstract

In this article, we examine differences in the technical efficiency (TE) orientation of 79 sample Indian Microfinance Institutions (MFIs) during 2010–2011 under various combinations of three inputs and three outputs, by using the data envelopment analysis (DEA). Furthermore, we have used principal component analysis (PCA) technique to identify various TE orientation of TE in Indian MFIs namely, loan portfolio orientation, client orientation (i.e. breadth of outreach) and average loan size per borrower (i.e. depth of outreach) orientation. We find that TE in Indian MFIs tremendously varies when we use different input and output combinations to specify production. The analysis shows that all fully technically efficient MFIs have loan portfolio orientation, may be they have financial orientation. Similarly, some MFIs have breadth of outreach and depth of outreach orientation, which may be due to their social orientation. JEL Classification: C14, G21, O16, O43