Pentagon Performance Model of Indian MFIs

Abstract

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 determinants of outreach and profitability in MFI´s: a structural equation approach

“…Also, she did not find any substantial evidence suggesting that small loans imply a higher sustainability risk. Balammal et al (2016) found that legal status, the regulatory environment, the age of the MFI, number of employees, capital structure, and cost per client have a significant impact on MFI financial performance.…”