The Sustainability and Outreach of Microfinance Institutions

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Microfinance emerged as an approach with great potential for alleviating poverty and improving access to financial services by offering small loans with no pledged collateral requirement. Due to the growing demand for microfinance, businesses have put more emphasis on the relationship between financial sustainability and outreach. Microfinance Institutions (MFIs) work to increase social sustainability by providing more services to particular clientele, while maintaining the financial and operational sustainability of the institutions. This study investigates the financial sustainability and outreach of 32 MFIs in India in terms of interest rate and default rate. This study employs a simple methodology for the evaluation of microcredit interest rates proposed by Muhammad Yunus (2007), along with a new methodology for the evaluation of microcredit default rates. As a preliminary stage of using the Black-Scholes (BS) model, this study tests the validation of MFIs' asset values and default rates of geometric Brownian motion (GBM) using data. The Ryan-Joiner test is used to check the independence of data, and the chi-square test on two-way tables is used to check the serial independence of data. The interest rate premium and the default rate from the BS model will facilitate making decisions on the sustainability and outreach of MFIs.

Original languageEnglish (US)
Title of host publicationAdvances in Production Management Systems
Subtitle of host publicationInnovative and Knowledge-Based Production Management in a Global-Local World - IFIP WG 5.7 International Conference, APMS 2014, Proceedings
PublisherSpringer New York LLC
Pages286-293
Number of pages8
EditionPART 2
ISBN (Print)9783662447352
DOIs
StatePublished - Jan 1 2014
EventIFIP WG 5.7 International Conference on Advances in Production Management Systems, APMS 2014 - Ajaccio, France
Duration: Sep 20 2014Sep 24 2014

Publication series

NameIFIP Advances in Information and Communication Technology
NumberPART 2
Volume439
ISSN (Print)1868-4238

Other

OtherIFIP WG 5.7 International Conference on Advances in Production Management Systems, APMS 2014
CountryFrance
CityAjaccio
Period9/20/149/24/14

All Science Journal Classification (ASJC) codes

  • Information Systems
  • Computer Networks and Communications
  • Information Systems and Management

Fingerprint Dive into the research topics of 'The Sustainability and Outreach of Microfinance Institutions'. Together they form a unique fingerprint.

  • Cite this

    Sim, J., & Prabhu, V. V. (2014). The Sustainability and Outreach of Microfinance Institutions. In Advances in Production Management Systems: Innovative and Knowledge-Based Production Management in a Global-Local World - IFIP WG 5.7 International Conference, APMS 2014, Proceedings (PART 2 ed., pp. 286-293). (IFIP Advances in Information and Communication Technology; Vol. 439, No. PART 2). Springer New York LLC. https://doi.org/10.1007/978-3-662-44736-9_35