Performance analysis of microfinance institutions: empirical evidence from MFIs of West Bengal

This paper aims to study the structural break in the microfinance industry caused by 'The Microfinance Institutions (Development and Regulation) Bill, 2012'. Data relating to 28 microfinance institutions (MFIs) of West Bengal for 14 years have been sourced from the Microfinance Information Exchange database with reference to the sustainability and performance of MFIs. For performance analysis, the parameters include a matrix of four performance indicators - portfolio quality, financial/operational efficiency, profitability and social performance. The study applied a panel data analysis module using fixed effect model (FEM) and random effect model (REM) and Hausman test was applied for the justification of the suitable model for the study. The result of the study provides shreds of evidence that the profitability of microfinance institutions is largely dependent on their financial and operational efficiency rather than their portfolio quality and social performance.