Journal of Business & Financial Affairs

Determinants of Financial Self Sufficiency of Andhra Pradesh Microfinance Institutions

Abstract

Kashif Beg

Microfinance aims to reduce poverty and generate profit by providing financial services to poor and unprivileged section of society. The southern state of Andhra Pradesh in India which is known as Mecca of Microfinance accounts for about 30% of the credit extended by MFIs. Andhra Pradesh Microfinance Crisis 2010 lead to the shutdown of many emerging and small MFIs and loss of loan portfolio rose to the extent of Rs 7,200 crore. Financial sustainability became very challenging issue for Microfinance institutions. This study uses cross sectional high quality panel data from MIX (Microfinance Information Exchange) market of 10 microfinance institutions of Andhra Pradesh, for the period 2005 to 2013 to examine the patterns of financial viability. This study employed pooled OLS model, fixed effect model and Random effect model of panel data in order to check consistency of results.