Journal Press India^®

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For a country like India, poverty remains to be one of the biggest policy concerns. Amongst various measures to eradicate it, Microfinance, of late, has provided a ray of hope.  The Task Force on Supportive Policy and Regulatory Framework for Microfinance constituted by NABARD defined microfinance as “the provision of thrift, saving, credit and financial services and products of very  small amount to the poor  in rural, semi-urban and urban areas for enabling them to raise their income levels and improve their standard of living” (Sen,  2008).
In numerous studies done across the world, it is generally believed that various microfinance initiatives have been able to make a difference in the target population’s lives. However, increasing doubts have been raised over the financial sustainability of microfinance institutions. MFIs  need  to be economically viable and  sustainable in  the  long  run  but  economic implications of  long  term sustainability are not being considered (Srinivasan et al., 2006).
At least in India, there does not seem to be any working model of analyzing the financial performance and thereby sustainability of microfinance institutions. This problem is compounded by the absence of a dedicated legislation on working and management of microfinance institutions. The lack of a regulatory mechanism for financial disclosures by microfinance institutions also abets the problem.
The present study is an attempt to analyze the financial performance of various microfinance institutions operating in India. It assumes significance because it is imperative that these institutions be run efficiently given the fact that they are users of marginal and scarce capital and the intended beneficiaries are the marginalized sections of society. MFIs must be able to sustain themselves financially in order to continue pursuing their lofty objectives, through good financial performance.

Keywords

Microfinance, Financial Sustainability

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