Determinants of Financial Performance of the Microfinance Institutions in Tamil Nadu

Abstract

Aims: To study and analyze the major determinants of financial performance of the microfinance institutions in Tamil Nadu. Study Design:  Purposive Random Sampling method was used. Both primary and secondary data was used for the analysis. Place and Duration of Study: In Tamil Nadu, Coimbatore district was purposively selected for the study. Survey was conducted for the collection of primary data pertaining to the period of 2021-22 and also secondary data was collected for the period of 2010-2019 from the Microfinance Information Exchange Market. Methodology: The secondary study is based on unbalanced panel data consists of 10 major Microfinance institutions in Tamil Nadu, out of around 25 microfinance institutions. To study the major determinants of financial performance of the 10 microfinance institutions in Tamil Nadu panel regression (fixed and random effect model) technique was employed. In addition, to analyze the general characteristics and constraints the percentage analysis and Garrett ranking technique was employed respectively. Results: The results of the study revealed that financial indicators such as operating self-sufficiency, Return on Assets, and Assets had a positive impact on increasing the performance of MFI. According to the panel regression, Debt-Equity Ratio, Number of Active Borrowers, Percentage of Women Borrowers, Operating Expenses to Asset ratio and Total Equity to total Asset are statistically significant in the model and suggesting the improvement in the Microfinance loan and building of training facilities. Conclusion: This study shows that the majority of the respondents depend on MFIs are females than males, and most of the beneficiaries were in the middle age group of 30-40 years old who preferred to approach the MFI for getting loans. The results specified Operating Self Sufficiency is positively and significantly related compared to Return on assets and Asset value.