Microfinance institutions (MFIs) extend financial and related services to the poorest population with an ultimate objective of poverty alleviation. Microfinance industry has seen an impressive growth in the past decade, although debates have stirred in recent years regarding their role and impact on society. Excessive profit making by MFIs retarded the desired social impact, thus, providing evidence for mission drift from the social objective of poverty alleviation to profit generation. The mission drift was evident during the microfinance crisis of 2010, which is marked as the critical stage in the history of Indian microfinance. In 2010, a spate of client suicides brought bad reputation for the sector and created funding and liquidity issues. Against the backdrop of crisis, the study intends to examine multi-dimensional performance of MFIs and the enabling factors for the year 2010-2012. The Pentagon performance model was proposed to capture the multi-dimensional performance. An empirical evaluation of the MFI performance for the year 2010 and subsequent years would render a clear picture on the rise and fall of the industry.

The paper conducts a detailed examination of the existing evaluative frameworks for microfinance institutions to gauge the differences and similarities. Efficiency evaluates how MFIs are meeting the performance standards considering time and budget constraints. Outreach evaluates the effectiveness of MFIs in reaching the beneficiaries. Relative efficiency scores were calculated using data envelopment analysis and outreach was measured in five different dimensions (pentagon model). Further, cluster analysis assisted in categorizing the MFIs into five value clusters. The study compares both outreach performance and relative efficiency scores employing ANOVA and correlation analysis. The study was conducted among the Indian context when the sector was hit by crisis during 2010. Paper brought out important insights about the sample. Indian MFIs were found to be more socially efficient, since the social dimension taken into consideration was number of female clients and majority of Indian MFIs has exclusive female focus. The correlation tests found that relative efficiency scores are positively related to depth (poor focus) and length (sustainability) outreach. The results showed that cluster analysis model basing outreach scores was more comprehensive and captured more information compared to the data envelopment model relative efficiency scores. The study is original in its approach in using cluster analysis for outreach performance and in the objective of comparing the two different models.