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Determinants of GLP and Profitability of selected MFIs | 1

1. INTRODUCTION AND METHODOLOGY


1.1 Introduction
The poor, like the rest of society, need financial products and services to
build assets, stabilize consumption and protect themselves against risks.
Microfinance serves as the last-mile bridge to the low-income population
excluded from the traditional financial services system and seeks to fill this gap
and alleviate poverty. Microfinance loans serve the low-income population in
multiple ways by:

Providing working capital to build businesses


Infusing credit to smooth cash flows and mitigate irregularity in

accessing food, clothing, shelter, or education and


Cushioning the economic impact of shocks such as illness, theft,
or natural disasters. Moreover, by providing an alternative to the
loans offered by the local moneylender priced at 60% to 100%
annual

interest,

microfinance

prevents

the

borrower

from

remaining trapped in a debt trap which exacerbates poverty.


Microfinance loans in India range in size from $100 to $500 per loan with
interest rates typically between 25% and 35% annually. The microfinance
model is designed specifically to help the low income population overcome
typical challenges such as illiteracy, lack of financial knowledge and deficiency
of collateralizable assets.

At the same time, the model takes advantage of

existing community support systems and networks to encourage financial


discipline and ensure high repayment rates
It is critical to evaluate the progress of the Indian microfinance sector
within the context of global microfinance. With one of the highest growth rates

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Determinants of GLP and Profitability of selected MFIs | 2

globally since 2002, the Indian microfinance sector has emerged as one of the
most socially conscious, commercially viable, and financially sustainable.
According to a MIX market study, India has one of the lowest average loan sizes
of around $150 as well as the lowest yield on portfolio of 21.2%. The small
loan size combined with the low interest rates testify to the social inclination of
Indian Micro Finance Institutions, which seek to genuinely foster financial
inclusion among the poor and alleviate poverty. In conjunction with this goal,
Indian Micro Finance Institutions have succeeded not only in comfortably
covering costs, but also returning healthy profits and Return on Assets (ROA).
This highlights Indian Micro Finance Institutions operational efficiency and
ability to function on tight budgets. True, Micro Finance Institutions in other
countries such as Brazil and Mexico have higher profit margins, but they offer
significantly larger loans with interest rates typically between 40-65%.
The inherent efficiency and resiliency of the Indian microfinance industry
proved critical during the recent financial meltdown during which growth
continued unabated despite a slowdown in the flow of funds which negatively
affected growth in microfinance in other markets around the world.

This

demonstrated self-sustainability is prognostic of the long- term viability and


potential of the sector. Moreover, the Indian financial system as a whole has
demonstrated its long-term confidence in the industry through its own
investment choices. Whereas the global average of domestic investment in
microfinance hovers around 65%, over 90% of the funding in India comes
through domestic channels, highlighting confidence in the underlying business
model and expectations of high future growth and returns.

1.2 Statement of the Problem

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Determinants of GLP and Profitability of selected MFIs | 3

Study on financial performance of Micro Finance Institutions is neglected


topic but requires a considerable amount of attention for policy purposes.
With the above constrains and challenges in mind, the present study focuses
on financial efficiency. Since, there are numerous literature available on impact
of microfinance on women empowerment and poverty eradication, the
researcher has considered a different study on assessment of Micro Finance
Institutions in India.
In India, micro finance is provided by a variety of institutions. These
include banks (including commercial banks, RRBs and co-operative banks),
primary agricultural credit societies and MFIs that include NBFCs, Section-25
companies, trusts and societies. But only the banks and NBFCs fall under the
regulatory purview of the Reserve Bank of India. Other entities, e.g., MFIs are
covered in varying degrees of regulation under their respective State
legislations. There is no single regulator for this sector. As a result, MFIs are
not required to follow some standard rules and are not subject to minimum
capital requirements and prudential norms. This has weakened their
management and governance, as they do not feel it mandatory to adopt some
specific systems, procedures and standards. Since MFIs are unregulated, one
cannot know about their internal financial health.
There is no specific code of conduct for the MFIs. It is not uncommon to
see many not for profit MFIs transformed to fully commercial and for profit
organizations. Also, many NGOs pursuing microfinance are in a stage of
transforming themselves into full-fledged MFIs. Many MFIs, basically promoted
for taking care of the needs of the poor, are setting their development goals and
business interests. In recent past, some erring MFIs in Andhra Pradesh have

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been charged with exploiting the poor with usurious interest rates and
intimidating the borrowers by forced loan recovery practices.

1.3 Significance of the Study


Affordability of loan is equally important to the access of financial
services to the poor.

Economic fundamentals exhort that every borrower is

interest sensitive and the capacity of borrowing decreases with increase in


interest rates. High interest rates may prove to be counterproductive, and
weaken the social and economic condition of poor clients. The high interest rate
charged by the MFIs from their poor clients is perceived as exploitative. The
interest rates are not well regulated for private MFIs as well as for formal
banking sector. However, there are certain self-regulated interest rates fixed by
intermediate and apex institutions. MFIs adopt different approaches for fixing
the interest rates or service charges on loans to members.
A complete picture of the MFI sector regarding the terms and conditions
of providing loans and financial services to their clients are not available.
Although the interest rates of some MFIs are regulated but they impose some
charges like transaction costs, the cost of documents and some other charges.
This increases the cost of borrowing, and thus making it less attractive.
Normally, banking sector is charging 9 to 10 per cent interest rate per annum
from the SHG members, while MFIs charge comparatively higher interest rate
which is generally 11 to 24 per cent per annum. But this interest rate varies
significantly according to the lending conditions and policy of the MFI.
Another problem faced by the microfinance program is the depth of
services provided. Though the outreach of the program is expanding, large
number of people are provided with microfinance services but the amount of
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loans is very small. The average loans per member in both MFIs and SHGs are
between Rs. 3,500 and 5,000. The average value of loans per SHG member for
various years.
This amount is not sufficient to fulfil the financial needs of the poor
people. The duration of the loans is also short. The small loan size and short
duration do not enable most borrowers to invest it for productive purposes.
They, generally, utilize these small loans to ease their liquidity problems.
These factors are the critical points in evaluating the performance of the
Micro Finance Institutions. The researcher has made a maiden attempt to
analyze the performance on the basis of Gross Loan Portfolio to Total Assets
and Profit Margin.

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1.4 Objectives
With the above theoretical background, the present study aims:

To study the relationship between Gross Loan Portfolio to Total Assets


(GLPTA) and Capital to Asset Ratio (CAR), Debt Equity Ratio (DER),
Operating

Expense

(OE),

Personnel

Expense

(PE),

Administrative

Expense (AE), Personnel Allocation Ratio (PAR), Total Expense (TE) and
Financial Expense (FE),

To study the relationship between Profit Margin (PM) and Return on Asset
(ROA), Return on Equity (ROE) and Financial Revenue (FR).

1.5 Research Methodology


1.5.1 Sources of Data
The study is primarily based on secondary data. The required data have
been collected from mix market and financial reports from the respective Micro
Finance Institutions.

1.5.2 Sampling Framework


Financial reports of selected 5 Micro Finance Institutions have been
taken based on total net fixed assets, whose turnover lies between 4.5 to 25
crores has been considered for analysis.

1.5.3 Statistical Instrument


To study the influence of independent variables on dependent variables,
multiple regression analysis is employed.

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1.6 Variable Definition


1.6.1 Efficiency
Dependent Variable
GLPTA Gross Loan Portfolio to
Total Asset

Independent Variable
CAR- Capital to Asset Ratio
DER- Debt Equity Ratio
OE- Operating Expense
PE- Personnel Expense
AE- Administrative Expense
PAR- Personnel Allocation Ratio
TE- Total Expense
FE- Financial Expense

1.6.1.1 Gross Loan Portfolio to Total Asset (GLPTA)


The outstanding principal balance of all of an MFIs outstanding
loans, including current, delinquent, and restructured loans, but not loans
that have been written off. It does not include interest receivable. Although
some regulated MFIs may be required to include the balance of interest accrued
and receivable, the MFI should provide a note that gives a breakdown between
the sum of all principal payments out- standing and the sum of all interest
accrued. Some MFIs choose to break down the components of the gross loan

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portfolio. The gross loan portfolio is frequently referred to as the loan portfolio
or loans outstanding, both of which create confusion as to whether they refer to
a gross or a net figure. The gross loan portfolio should not be confused with the
value of loans disbursed.

Gross Loan Portfolio to Total Asset =

Gross Loan Portfolio


Assets

1.6.1.2 Capital to Asset Ratio (CAR)


This is the ratio of capital to total assets, without the latter being risk
weighted. Capital is measured as total capital and reserves as reported in the
sectorial balance sheet; for cross-border consolidated data, Tier 1 capital can
also be used. It indicates the extent to which assets are funded by other than
own funds and is a measure of capital adequacy of the deposit-taking sector. It
complements the capital adequacy ratios compiled based on the methodology
agreed to by the BCBS. Also, it measures financial leverage and is sometimes
called the leverage ratio.

Capital to Asset Ratio =

Adjusted Total Equity


Adjusted Total Assets

1.6.1.3 Debt Equity Ratio (DER)


This is calculated by using debt as the numerator and capital and
reserves as the denominator. It is a measure of corporate leverage the extent to
which activities are financed out of own funds.
Adjusted Total Liability
Adjusted Total equity

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Determinants of GLP and Profitability of selected MFIs | 9

Debt Equity Ratio =

1.6.1.4 Operating Expense (OE)


Includes personnel expense and administrative expense, but excludes
financial expense and loan loss provision expense. It does not include expense
linked to non-financial services. The authors recognize that it is common to
refer to the sum of all expenses from operations (i.e., financial and loan-loss
provision expenses) in the definition of this term, just as operating revenue
includes all revenue from operations. However, the definition proposed here
corresponds with the most common usage in banking.

Operating Expense =

Adjusted Operating Expense


Adjusted Average Total Assets

1.6.1.5 Personnel Expense (PE)


Includes staff salaries, bonuses, and benefits, as well as employment
taxes incurred by an MFI. It is also referred to as salaries and benefits or staff
expense. It may also include the costs of recruitment and/or initial orientation.
It does not include ongoing or specialized training for existing employees, which
is an administrative expense.

Personnel Expense =

Adjusted Personnel Expense


Adjusted Average Total Assets

1.6.1.6 Administrative Expense (AE)

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Determinants of GLP and Profitability of selected MFIs | 10

Non-financial expenses directly related to the provision of financial


services or other services that form an integral part of an MFIs financial
services relation- ship with its clients. Examples include depreciation, rent,
utilities, supplies, advertising, transportation, communications, and consulting
fees. It does not include taxes on employees, revenues, or profits, but may
include taxes on transactions and purchases, such as value-added taxes.
Number of Loan Officers
Administrative Expense =

Number of Personnel

1.6.1.7 Personnel Allocation Ratio (PAR)


Payments from the MFI to its staff for services rendered; usually the
largest operating expense for an MFI
Number of Loan Officers
Personnel Allocation Ratio =

Number of Personnel

1.6.1.8 Total Expense (TE)


Includes personnel expense and administrative expense, but excludes
financial expense and loan loss provision expense. It does not include expense
linked to non-financial services. The authors recognize that it is common to
refer to the sum of all expenses from operations (i.e., financial and loan-loss
provision expenses) in the definition of this term, just as operating revenue
includes all revenue from operations. However, the definition proposed here
corresponds with the most common usage in banking.

Total Expense =

Adjusted (financial expense + Net Loss +Provision Expense


+ Operating Expense)
Adjusted Average Total Asset

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1.6.1.9 Financial Expense (FE)


All interest, fees, and commissions incurred on all liabilities, including
deposit accounts of clients held by an MFI, commercial and concessional
borrowings, mortgages, and other liabilities. It may also include facility fees for
credit lines. It includes accrued interest as well as cash payment of interest.

Financial Expense =

Adjusted Financial Expense


Adjusted Average Total Assets

1.6.2 Profitability
Dependent Variable
PM Profit Margin

Independent Variable
ROA Return on Asset
ROE - Return on Equity
FR Financial Revenue

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1.6.2.1 Profit Margin (PM)


Measures a providers profitability in terms of its effectiveness in
managing costs.
Profit Margin =

Net Income before Taxes and Donations


Operating and non-operating revenue

1.6.2.2 Return on Asset (ROA)


This is calculated by dividing net income before extraordinary items and
taxes (as recommended in the FSI Guide) by the average value of total assets
(financial and nonfinancial) over the same period. This is an indicator of bank
profitability and is intended to measure deposit takers efficiency in using their
assets.
Return on Asset =

Net Operating Income - Taxes


Average Assets

1.6.2.4 Return on Equity (ROE)


This is calculated by using earnings before interest and tax as the
numerator and the average value of capital and reserves over the same period
as the denominator. It is a profitability ratio, which is commonly used to
capture nonfinancial corporations efficiency in using their capital.
Net Operating Income - Taxes
Return on Equity =
Average Equity

1.6.2.5 Financial Revenue (FR)


There are two types of financial revenue they are financial revenue from
investments and Loan portfolio. Revenue from interest, dividends, or other

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payments generated by financial assets other than the gross loan portfolio,
such as interest-bearing deposits, certificates of deposit, and treasury
obligations. This includes not only interest paid in cash, but also interest
accrued but not yet paid.
Revenue from interest earned, fees, and commissions (including late fees and
penalties) on the gross loan portfolio only. This item includes not only interest
paid in cash, but also interest accrued but not yet paid.
Adjusted Financial revenue
Financial Revenue =
Adjusted Average Total Assets

1.7 Tool / Model


GLPTA = + 1 CAR + 2 DER + 3 OE+ 4 PE + 5 AE + 6 PAR
+ 7 TE + 8 FE + 9 OELP +
Where,
GLPTA = Gross Loan Portfolio to Total Asset
= Constant
1 9 = Estimated coeffi cients
= error term
PM = + 1 AOB + 2 ROA + 3 ROE+ 4 FR + 5 YGPP +
Where,
PM= Profit Margin
= Constant
1 5 = Estimated coeffi cients
= error term

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1.8 Limitations of the Study


The present study is purely based on secondary data all the drawbacks
applicable to secondary data are also applicable to those of this study.
The study has taken into consideration of 5 sample Microfinance
Institutions which may not represent the entire population.
The study is quantitative in nature. The study has ignored the qualitative
aspects of Micro Finance Institutions.

2. REVIEW OF LITERATURE
Padma

Manoharan

(2011)1In

the

study

analyzed

the

financial

performance of various microfinance institutions operating in India based on


their profile, financial health and performance. According to them, MFIs must
be able to sustain themselves financially in order to continue pursuing their
lofty objectives, through good performance and vivid functioning. Thus, there is
an urgent need to widen the scope, outreach as also the scale of financial
services to cover the unreached population.
Oliver Bright (2011)2In the study analyzed the banks and financial
institutions in an annual credit plan with the current year target and previous
year target achieved in terms of value and achieved percentage on target fixed.
In this study, they assessed the financial performance of MFIs in India with the
objective of finding out the pattern of growth of micro credit in target fixed,
target achieved in terms of value and in terms of percentage achieved on target
fixed. They focused mostly to find the growth pattern of micro credit fixed and
offered to Kanyakumari District through the annual credit plan during 2005 to
2009.As per their analysis, it was concluded that the growth pattern of the

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micro credit offered in Kanyakumari District is found to be negative in most of


the schemes and plans of micro credit.
Abdul Qayyum (2009)3In the study analyzed the efficiency and
sustainability of MFIs in South Asia with the objective of estimating the
efficiency and sustainability of microfinance institution working in the South
Asian countries such as Bangladesh, Pakistan and India. For the efficiency
analysis, they used non parameter ric Data Envelopment Analysis. The
technical efficiency figures for Pakistan, Bangladesh and India are 0.395,
0.087, and 0.28, respectively, while average pure technical efficiencies for these
countries respectively range between0.713-0.823, 0.175-0.547 and 0.4130.452. Three countries combine analysis revealed that there are two efficient
MFIs under CRS and five efficient MFIs under VRS assumption in these
countries.
Alain de Crombrugghe(2007)4in the study analyzed using regression
analysis to study the determinants of self-sustainability of a sample of
microfinance institutions in India. They investigated particularly three aspects
of sustainability: cost coverage by revenue, repayment of loans and costcontrol. Their results suggested that the challenge of covering costs on small
and partly unsecured loans can indeed be met, without necessarily increasing
the size of the loans or raising the monitoring cost. Regression results showed
that increasing the size of the loans works only up to a point to reduce cost,
because large loans require more individual monitoring than small ones which
fit into group mechanisms.

Alok Misra(2006)5In the study analyzed assessed the microfinance


sector in India cannot be seen in isolation of the overall economy the economy

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comprising nearly 110 million agricultural holdings, over 60 percent of those


with an area below 1 hectare, and nearly 35 million non-agricultural
enterprises. The stark reduction of bank credit proportion to small borrowers
from 18 percent in 1994 to 5.3 percent in 2002 shows that the challenge of
extending financial services, at least to all the productive citizens of the
country, must be tackled afresh.

Anne-Lucie Lafourcade (2005)6In the study analyzed found out that out
of the 163 MFIs that provided information for this study, 57 percent were
created in the past eight years and 45 percent of those in the past four.2
African MFIs appear to serve the broad financial needs of their clients. They
asserted that MFIs in Africa tend to report lower levels of profitability, as
measured by return on assets, than MFIs in other global regions. Among the
African MFIs that provided information from their study, 47 percent post
positive unadjusted returns; regulated MFIs report the highest return on assets
of all MFI types, averaging around 2.6 percent. MFIs in Africa also
demonstrated higher levels of portfolio quality, with an average portfolio at risk
over 30 days of only 4.0 percent.
Abhijit Banerjee (2013)7in the study analyzed reports on the first
randomized evaluation of the impact of introducing the standard microcredit
group-based lending product in a new market. In 2005, half of 104 slums in
Hyderabad, India were randomly selected for opening of a branch of a
particular microfinance institution (Span- Dana) while the remainder were not,
although other MFIs were free to enter those slums. Fifteen to 18 months after
Spandana began lending in treated areas, households were 8.8 percentage
points more likely to have a microcredit loan. This studythe first and longest
running evaluation of the standard group-lending loan product that has made
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microfinance known worldwideyields a number of results that may prompt a


rethinking of the role of microfinance. The first result is that, in contrast to the
claims sometimes made by MFIs and others, demand for microloans is far from
universal. By the end of our three-year study period, only 38% of households
borrow from an MFI30, and this is among households selected based on their
relatively high propensity to take up microcredit. However, these results are not
specific to this context: similar findings emerge from four other studies run on
dierent continents, in booms and busts, and in both urban and rural
contexts.

Befekadu B. Kereta (2007)8in the study analyzed Ethiopia is one of the


least developed countries. The per capita income of the country, though it
showed improvement in recent years, is only USD 180 as at end of 2005/061.
Most of the poor, which mainly argued to be constrained by absences of credit
access, participant in some kind of informal sector ranging from small petty
trading to medium scale enterprises. Several micro finance institutions (MFIs)
have established and have been operating towards resolving the credit access
problem of the poor. In light of this, this paper attempted to look at MFIs
performance in the country from outreach and financial sustainability angles
using data obtained from primary and secondary sources.

The study finds

that the industry's outreach rise in the period from 2003 to 2007 on average by
22. 9 percent. It identified that while MFIs reach the very poor, their reach to
the disadvantages particularly to women is limited (38.4 Percent). From
financial sustainability angle, it finds that MFIs are operational sustainable
measured by return on asset and return on equity and the industry's profit
performance is improving over time. The paper examines the performance of
MFIs in relation to outreach and financial sustainability. It reviews literatures
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on core performance indicators of MFIs. The literatures noted that MFIs could
be examined through three main polar: outreach to the poor, financial
sustainability and welfare impact. The welfare impact assessment is not
covered in this paper due to time and money limitations. Both secondary and
primary data (obtained from questionnaire distributed to representative sample
MFIs) has been employed in the study. In the analysis process, the study has
adopted simple correlation and descriptive analysis techniques. While,
dependency ratio measured by the ratio of donated equity to total capital
decline, ratio of retained earnings to total capital is raising letting the industry
to be financial self-sufficient. Using Non performing Loan (NPLs) to loan
outstanding

ratio

indicator

the

study

found

out

that

MFI

financial

sustainability is in a comfort zone with average NPLs ratio of 3.2 percent for the
period from 2005 to 2007. The study also found low but increasing default rate.

Marie

Godquin

(2006)9in

the

study

analyzed

analysis

of

the

performance of microfinance institutions (MFIs) in terms of repayment. We use


1629 loan observations to analyze with a profit the determinants of the
repayment performance of borrowers of the BRAC, the BRDB and the Grameen
Bank. We test for endogeneity of the size and duration of the loan in the
determination of repayment and use instrumental variables to correct for it. In
a second step, we produce an ex-post analysis of the loan allocation of the
three MFI. The age of the group, a proxy for social ties inside the group, showed
a significant negative impact on the reimbursement which raises the question
of the necessity of specific incentives instruments for experienced borrowers.
The social ties of the borrower out of his group have the expected positive
impact as well as the proxy for dynamic incentives. In terms of sex, group
homogeneity proved a positive impact on repayment performance but we
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cannot attribute the same positive impact to group homogeneity in terms of age
or education level. Non-financial services did not show a positive impact in all
the cases whereas MFIs tend to attribute bigger loans to borrowers who have
access to these services.

Manfred Zeller(2001)10In the study analyzed a systematic sampling has


been adopted through the contacting of international NGOs and networks
supporting various MFIs. The information has been complemented by a review
of publications and technical manuals on microfinance. The database of MFIs
from 85 developing countries shows 1,500 institutions (790 institutions
worldwide plus 688 in Indonesia) supported by international organizations.
They reach 54 million members, 44 million savers (voluntary and compulsory
savings), and 23 million borrowers. The total volume of outstanding credit is
$18 billion. The total savings volume is $12 billion, or 72 percent of the volume
of the outstanding loans. MFIs have developed at least 46,000 branches and
employ around 175,000 staff. On the whole, MFIs reach 54 million members,
who have received $18 billion in loans and accumulated $13 billion in savings.
With these figures, the Micro-Credit Summit objective to reach 100 million poor
people by 2005 appears be achievable if one were to assume that most of the
current MFI clients were poor. However, MFIs are highly concentrated in size
(3 percent of the largest MFIs reach 80 percent of the members). If the
stakeholders of the Micro-Credit Summit wish to achieve their goal, further
client growth among the bigger MFIs should be necessary. This is because the
many small MFIs will not contribute much to the total numbers even if they
would double or triple their client numbers by 2005. However, it will be
necessary to support the change of scale of small but efficient MFIs.

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Marc J. Epstein (2005)11In the study analyzed attempt to carefully


specify the antecedents and consequences of investments in microfinance, to
examine the nature and amount of existing contribution, and consider how to
enhance the contribution of microfinance to the alleviation of global poverty.
We have completed a thorough review of the literature, examination of prior
impact studies and data, interviews with senior officers at Opportunity
International, and analysis of data and field interviews of microfinance
activities in Ghana. Those impacts can certainly include a) providing the poor
with increased access to working capital and other financial services and b)
reducing risks and vulnerability and helping to protect the poor from lifes
financial shocks and helping to stabilize their income. And, the shocks can be
significant and can quickly eliminate (at least in the short term) many of the
benefits created by personal financial improvements. But, microfinance can do
more. It can enable its borrowers to cross the poverty line and stay across it.
It may be able to facilitate significant improvements in social condition in
additional to economic improvements.

Christian Ahlin (2009)12In the study analyzed the little is known about
whether and how the success of microfinance institutions (MFIs) depends on
the country-level context, in particular macroeconomic and macro-institutional
features. Understanding these linkages can make MFI evaluation more
accurate and, further, can help to locate microfinance in the broader picture of
economic development. We collect data on 373 MFIs and merge it with countrylevel economic and institutional data. Evidence arises for complementarity
between MFI performance and the broader economy. This study is an attempt
to place microfinance institutions in national context. We examine country-level
determinants of success of 373 MFIs from around the world. There is evidence
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Determinants of GLP and Profitability of selected MFIs | 21

for

complementarity

between

overall

economic

performance

and

MFI

performance. Growth appears good for MFI financial performance, in part due
to its eect on default. Breaking even appears easier to do in richer countries
at least up to a point. Also, a deeper financial sector is associated with lower
operating costs, lower default, and lower interest rates, suggesting that broad
financial competition does benefit micro-borrowers.

CS Reddy (2005)13In the study analyzed in the early 1980s, the GoI
launched the Integrated Rural Development Program (IRDP), a large poverty
alleviation credit program, which provided government subsidized credit
through banks to the poor. It was aimed that the poor would be able to use the
inexpensive credit to finance themselves over the poverty line. Recently,
microfinance has garnered significant worldwide attention as being a
successful tool in poverty reduction. In 2005, the GoI introduced significant
measures in the annual budget affecting MFIs. Specifically, it mentioned that
MFIs would be eligible for external commercial borrowings which would allow
MFIs and private banks to do business thereby increasing the capacity of MFIs.
In some areas, there is a reasonable amount of infrastructure that state-owned
rural banks operate.

As some SHGs have grown and matured to a sizeable

scale, they need access to more financial services. Governments can address
this need through their state-owned banks by introducing flexible and easily
accessible products.

Specifically, products such as innovative savings

products, micro-insurance, larger loans and enterprise financing can be


introduced.

Giovanni FERRO LUZZI (2006)14In the study analyzed Measuring the


performance of microfinance institutions (MFIs) is not a trivial task. Indeed,
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looking at the financial sustainability of an MFI only gives one feature of its
performance. As many MFIs primarily exist in order to help the poorest people,
one also has to include aspects of outreach in their performance. Hence, MFIs
performance can be termed multidimensional. This paper illustrates how some
statistical tools can offer new insights in the context of MFIs performance
evaluation. Factor analysis is used in a first step to construct performance
indices based on several possible associations of variables without posing too
many a priori restrictions. Microcredit is often promoted as an efficient tool to
help the poor, since it is based on sound economic principles. Rates of return
of small scale investments can be very high and explain why some people are
ready to pay high interest rates in order to finance them. However, market
failures and relatively high transaction costs can prevent a substantial part of
these investments to be realized through private financial intermediaries,
especially in remote rural areas. MFIs ambition is to fill the gap. As discussed
earlier, they can do so either by focusing on the poor and expanding their
outreach, or they may prioritize their financial viability.

Valentina Hartarska (2004)15In the study analyzed paper presents the


first evidence on the impact of external governance mechanisms, board
diversity and independence, and management compensation on outreach and
sustainability of microfinance institutions in Central and Eastern Europe and
the

Newly

Independent

States.

Results

indicate

that

among

external

governance mechanisms only auditing affects outreach, whereas regulation


and rating do not affect performance. Board diversity improves both outreach
and

sustainability

while

larger

and

less

independent

boards

lower

sustainability. Performance-based compensation is not effective in aligning the


interest of managers and stakeholders, and underpaying managers reduces
Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 23

outreach.

External governance mechanisms,

specifically supervision

by

regulatory authority and rating by independent agency, are not effective


mechanisms of control. Only auditing has a positive effect on outreach.
Internal governance mechanisms, particularly the board matter, as MFIs with
local boards achieve better sustainability. Consistent with other studies on
board size and independence, this paper finds that in microfinance larger
boards and boards with higher proportion of insiders have worse financial
results. This study finds that traditional mechanisms designed to align the
interests of managers with those of other stakeholders have a limited role in
microfinance. Performancebased compensation of managers does not improve
MFI performance. However, offering lower salary so that only managers
committed to the mission would take the job (as suggested by the NGO
literature) is ineffective because MFIs with underpaid managers achieve less
outreach. Finally, manager experience does not affect sustainability and its
impact on depth of outreach is small in magnitude.

Nathalie Holvoet (2005)16Evaluations of the effects of microfinance


programs on womens empowerment generate mixed results. While some are
supportive of microfinances ability to induce a process of economic, social and
political empowerment, others are more skeptical and even point to a
deterioration

of

womens

overall

well-being.

Against

this

background,

development scholars and practitioners have sought to distil some of the


ingredients that might increase the likelihood of empowerment or at least
reduce adverse effects. This article formally tests the impact of some of the
suggested changes in program features on one particular dimension of
empowerment: decision-making agency. Womens group membership seriously
shifts overall decision-making patterns from norm-guided behavior and male
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Determinants of GLP and Profitability of selected MFIs | 24

decision-making to more joint and female decision-making. Longer-term group


membership and more intensive training and group meetings strengthen these
patterns. In terms of which particular features in group-based lending are most
important, loaners themselves suggest that peer pressure and the availability of
a group fund, which they see as a lender of last resort for consumptive and
emergency purposes, increased the probability that the loans were effectively
used for the intended productive purpose. They also felt that their position in
the household had improved as they had secured access to long-term financial
resources through their personal savings account and the group fund. Social
group intermediation had further gradually transformed groups into actors of
local institutional change. As such they were increasingly involved in extrahousehold bargaining with the community, thereby strengthening their
individual fallback position within the household.

Jonathan Morduch (2003)17Poor households face many constraints in


trying to save, invest, and protect their livelihoods.

They take financial

intermediation seriously and devote considerable effort to finding workable


solutions. Most of the solutions are found in the informal sector, which, so far,
offers low-income households convenience and flexibility unmatched by formal
intermediaries.

The microfinance movement is striving to match the

convenience and flexibility of the informal sector, while adding reliability and
the promise of continuity, and in some countries it is already doing this on a
significant scale. Getting to this point reaching poor people on a massive scale
with popular products on a continuous basis has involved rethinking basic
assumptions along the way.

The microfinance movement is thus striving to

match the convenience and flexibility of the informal sector, while adding
reliability and the promise of continuity, and in some countries it is already
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Determinants of GLP and Profitability of selected MFIs | 25

doing this on a significant scale. Getting to this point reaching poor people
on a massive scale with popular products on a continuous basis has involved
rethinking basic assumptions along the way, and programs in Bangladesh and
Indonesia are still developing new products and approaches.

John Weiss (2004)18The microfinance revolution has changed attitudes


towards helping the poor in both Asia and Latin America and in some countries
has provided substantial flows of credit, often to very low-income groups or
households, who would normally be excluded by conventional financial
institutions. Much has been written on the range of institutional arrangements
pursued in different organizations and countries and in turn a vast number
studies have attempted to assess the outreach and poverty impact of such
schemes. However, amongst the academic development community there is a
recognition that perhaps we know much less about the impact of these
programs than might be expected given the enthusiasm for these activities in
donor and policy-making circles. To quote a recent authoritative volume on
microfinance. Despite the current enthusiasm among the donor community for
microfinance programs, rigorous research on the outreach, impact and costeffectiveness of such programs is rare. Design of aid programs would ideally
incorporate evidence on all three points, but the research that does exist
generally focuses on only one of these criteria: either outreach, impact or costeffectiveness. In part this reflects the difficulty of establishing an appropriate
statistical methodology and implementing those standards in practice, and in
part no doubt reflects the variation found in practice in the way in which
microfinance operates.

The

evidence

surveyed

here

suggests

that

the

conclusion from the early literature, that whilst microfinance clearly may have

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 26

had positive impacts on poverty it is unlikely to be a simple panacea for


reaching the core poor, remains broadly valid.

Rajesh Chakrabarti (2006)19Microfinance is gathering momentum to


become a major force in India. The self-help group (SHG) model with bank
lending to groups of (often) poor women without collateral has become an
accepted part of rural finance. The paper discusses the state of SHG-based
microfinance in India. With traditionally loss-making rural banks shifting their
portfolio away from the rural poor in the post-reform period, SHG-based
microfinance, nurtured and aided by NGOs, have become an important
alternative to traditional lending in terms of reaching the poor without
incurring a fortune in operating and monitoring costs. The government and
NABARD have recognized this and have emphasized the SHG approach and
working along with NGOs in its initiatives. Over half a million SHGs have been
linked to banks over the years but a handful of states, mostly in South India,
account for over three-fourth of this figure with Andhra Pradesh being an
undisputed leader. In this paper we have sought to provide a birds-eye view of
the microfinance sector in India. There have definitely been significant
advances in recent years and the concept and practice of SHG-based
microfinance has now developed deep roots in many parts of the country.
Impact assessment being rather limited so far, it is hard to measure and
quantify the effect that this Indian microcredit experience so far has had on
the poverty situation in India. Doubtlessly, a lot needs to be accomplished in
terms of outreach to make a serious dent on poverty. However, the logic and
rationale of SHG-based microfinance have been established firmly enough that
microcredit has effectively graduated from an experiment to a widely accepted
paradigm of rural and developmental financing in India.
Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 27

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 28

Richard L. Meyer (2002)20Major investments have been made in


developing microfinance in Asia with reducing poverty as one of the frequently
stated objectives.

A variety of institutional forms of microfinance are being

introduced in the region including by the ADB and financial institutions


pursue different objectives, so it is difficult to assess how well microfinance is
actually contributing to poverty alleviation.

There is little systematic data

available on which to make global or regional generalizations. The objective of


this paper is to provide some insights into how well the industry is performing
by summarizing and evaluating key studies and data for the region. A critical
triangle of microfinances, including outreach, sustainability and impact, is
used as the conceptual framework to organize the presentation. Criteria are
defined for these three objectives and methodological problems are discussed
for each.

Evaluating impact presents the most serious empirical challenge.

There is a tendency to adopt the model of many Bangladesh MFIs in expecting


clients to follow a lockstep system of borrowing ever-larger loans and
continuously attending weekly meetings to pay installments and deposit
savings.

The one size fits all approach to lending is too inflexible to meet

adequately the demands of heterogeneous clients, and results in multiple


memberships (overlap), switching MFIs, dropouts, loan delinquencies and
continual reliance on informal sources of financial services.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 29

3. MICRO FINANCE INSTITUTIONS - AN OVERVIEW


3.1 Target of Microfinance
The fundamental reason behind the Indian microfinance industrys
impressive growth is that it is fulfilling a critical need of its target audience, the
low-income population, which has thus far remained unaddressed by the
traditional
Ric
h
(0.
6
mm
HH
Middle
) Class

(11mm HH)

Aspirers
(41mm HH)

sector.

services

Currently,

total

population of 1.1 billion is being


served by 50,000 commercial
banks, 12,000 co-operative bank
offices, 15,000 regional rural
banks

and

agriculture

Deprived
(135mm HH)

financial

density

of

100,000

primary

societies.
financial

This

services,

however, belies the availability of

financial services to low-income households, which make up a significant


chunk of the Indian population. Before exploring why financial services have
failed to reach this segment of the population, it is necessary to first define
their target.
The Indian population can be divided into four categories based on
household income levels. The Rich who make up 0.4% of the households have
an annual household income greater than $20,000.

The Middle Class

comprises 11 million households, or 5.9% of the total households, and has an

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 30

annual household income between $4,000 and $20,000. The Aspirers make up
nearly22% of the households and have an annual household income between
$1,800 and $4,000. Lastly, the deprived segment, the prime target of the
microfinance industry, comprises 135 million or 72% of the households and
has an annual household income below $1,800.Despite the density and
robustness of the formal Indian financial system, it has failed to reach the
deprived segment, leaving approximately 135 million households entirely
unbanked. The size of India's unbanked population is one of the highest in the
world, second only to that of China. The microfinance sector targets the poorer
portion of the Aspirer segment and the mid to richer portion of the deprived
segment. The industry has thus far been able to create a service model and
products that are suitable to these segments and these services and products
have proven successful in affecting improvements in the clients economic
status. The reasons behind the formal financial sectors failure to reach such a
large segment of the Indian population are manifold and operate in a selfreinforcing manner.

The principal prohibiting factor is that banks face

extremely high fixed and variable costs in servicing low income households,
resulting in high delivery costs for relatively small transactions. Much of the
low income population is located in rural areas that are geographically remote
and inaccessible. For this population, the cost of visiting a traditional bank
branch is prohibitive due to the loss of wages that would be incurred in the
time required.
Concurrently, from a banks perspective, the cost of operating a branch
in a remote location is financially unfeasible due to the low volume and high
cost dynamic. Moreover, low income households are not interested in the same
products that are usually utilized by the rest of the population because they

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 31

have different immediate needs, lower financial capacities and variable income
streams.
The unsuitability of existing credit products for low income households is
exacerbated by a general unavailability of collateralizable assets. Additionally,
the low income population is often illiterate and lacks financial knowledge,
making it nearly impossible for it to even contemplate availing existing financial
services, which provide no ancillary support to mitigate these challenges.
In the absence of access to formal financial services, the low income
segment has traditionally relied on local moneylenders to fulfill their financial
needs. While this money is readily available, it is often exorbitantly priced at
60%-100% annual yields and forces the borrower into a classic debt trap,
entrenching her in poverty. Credit from moneylenders has not traditionally
acted as a tool for business expansion or enhancement of quality of life, but
rather as a lifeline for immediate consumption or healthcare needs.

3.2 Microfinance Business Model


The microfinance business model is designed to address the challenges
faced by the traditional financial services sector in fulfilling the credit
requirement of the low income segment at an affordable and sustainable cost.
Most Micro Finance Institutions follow the Joint Liability Group (JLG) model. A
JLG consists of five to ten women who act as co-guarantors for the other
members of their group. This strategy provides an impetus for prudent selfselection of reliable and fiscally responsible co-members. Moreover, the JLG
has an inbuilt mechanism that encourages repayment in a timely fashion as
issuance of future loans is contingent upon the prior repayment record of the
group.
Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 32

Metric

Amount (in words)

Interest rate charged

Typically 25-35% p.a.

Interest on debt

12-16%; lower for larger Micro Finance


Institutions

Operating expense ratio

6-15% depending on level of efficiency

ROA

Typically 3-5%

Debt/Equity

Typically 5-8x

ROE

20-30%

Micro-loan sizes vary from an initial loan size between $100 and $150 to
subsequent loans of $300 to $500 with an annual interest rate between 25%
and 35%. The term loans are structured with weekly or monthly repayment
schedules and a 6-month to 2 year term. Microfinance institutions typically
charge a higher rate of interest to their clients than traditional commercial
banks as the administrative costs of servicing smaller loans is far higher in
percentage terms than the cost of servicing larger loans. Additionally, Micro
Finance Institutions provide doorstep services to their customers, a strategy
that has a high cost associated with it, especially in rural areas where
population densities tend to be low. Because of this model, Micro Finance
Institutions generally face an operating expense ratio (OER) between 6% and
15%, depending on the scale and efficiency level of the particular MFI as well
its area of operations. Additionally, today, Micro Finance Institutions face
borrowing costs in the range of 12% to 16% per annum, depending on the size
and track-record of the individual MFI.

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Determinants of GLP and Profitability of selected MFIs | 33

This model allows well-run Micro Finance Institutions to achieve a ROA


of about 3% to 5% and a ROE of as much as 20% to 30%. These high ROA and
ROE numbers are contingent upon low cost financing from commercial banks
and the ability to maintain high portfolio growth along with high portfolio
quality. The portfolio quality for Micro Finance Institutions is typically superior
to commercial banks with total Non- performing Assets 180 days past due of
0.2% to 3% as opposed to 3% to 10% for commercial banks. Micro Finance
Institutions typically enjoy extremely low delinquency rates despite the
nonexistence of security. This portfolio quality is driven by the discipline
embedded in the JLG model through the self-selection of the group members
as well as the mutual support informally embedded in the groups in relation to
members loans.
The 3% to 5% ROA range is a product of both the maturity level of Micro
Finance Institutions and the basic business model to which they subscribe. No
MFI typically begins by achieving a 3% ROA, but it can be achieved and
becomes sustainable as the MFI refines its business model and scales enough
to become profitable. Within this range, however, an MFIs ROA will be
determined largely by its particular business model. For example, within Lok
Capitals portfolio, Spandana has consistently had an ROA above 5% since
Loks investment in August 2007. By and large, Spandana faces the same cost
of debt as the rest of the industry, however, its single-product business model
hinges on maintaining a consistently low OER, which has also been below 6%
since the time of Loks investment. This low OER allows Spandana to charge
one of the lowest interest rates on its loan products in the industry and thus
successfully serve its social mission.

Jagadeesh T - Department of Commerce - SKASC

By contrast, Bhartiya Samruddhi

Determinants of GLP and Profitability of selected MFIs | 34

(BASIX) is a mature MFI with an ROA between 2% and 4% and a different


approach to the microfinance business model.
As a mature MFI, BASIX has begun exploring alternative products and
services, financial and non-financial to form deeper linkages with its existing
clients and maintain its competitiveness. While BASIX may make slight
improvements in its OER in the future, that will not be its key focus.
Nevertheless, as it continues to strengthen its client base, develop its product
base and expand at a sustainable rate, BASIX will continue to comfortably
produce an attractive ROA. Ujjivan presents a blend between the models of
Spandana and BASIX. Ujjivan, which is a less mature MFI partner, has only
recently achieved an ROA above 3%.

Ujjivans business model currently

operates on an assumption of an OER in the mid-teens as it is still in the


process of ramping up its operations at an extremely high rate. Ujjivan seeks
to become a larger commercial player in the sector, but it is simultaneously
dedicated to expanding into untested geographical territories and targeting
clients who continue to be excluded from the microfinance sector.
The groundwork required in this approach makes for inherently high
operating costs.

As Ujjivan matures and its business model gains more

cogency, its OER will certainly continue to decline, ensuring a healthy and
sustainable ROA going forward. These three examples are reflective of trends in
the sector overall. Nascent Micro Finance Institutions make gains in ROA as
they scale their businesses and then remain within the 3% to 5% range as they
streamline their business models to reflect their longer-term goals.

3.3 Social Mission financial Inclusion

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 35

While microfinance presents a viable commercial opportunity, the sector cannot


ignore its underlying mission to foster financial inclusion and the missions
importance to ensuring its long-term sustainability. Being constantly vigilant of
its social impact and implementing a definitive program to foster inclusion, will
serve to deepen the microfinance sectors commitment to the social mission
that it was created to execute and prevent it from becoming disengaged from its
social agenda even as it gains scale. In other words, even as they become
commercially successful, Micro Finance Institutions need to keep the interests
of their current and potential customers at the forefront of their strategic
decision-making process. Awareness of the customers interests feeds into the
sectors strategy from two angles: capacity and need.
Micro Finance Institutions have a responsibility to be truly discerning of
potential

customers

capacities

to

avoid

over-indebtedness

and

credit-

dependence which ultimately keeps them trapped in poverty. From a need


angle, microfinance institutions cannot hope to ensure successful long-term
futures by offering a single product to their consumers, who wish to utilize
their increased financial capacities to acquire services and products such as
education and healthcare that improve their quality of life. Moreover, Micro
Finance Institutions need to diversify their customer base through exploring
untapped

geographies

and still excluded segments of

the low-income

population. This strategy will ensure that the social mission of Micro Finance
Institutions remains intact and that the business continues to be successful
over the long run, achieving the ultimate social-commercial balance and
strengthening the double bottom line advantage.

3.4 Market Trends

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 36

As the Indian microfinance sector matures, Lok Capital expects the year-onyear growth rate to decline to still high, but more sustainable levels. Over the
next four years, Lok Capital projects the number of borrowers to grow at 34%,
which is 60% less than the historical 5-year CAGR of 86% and the portfolio
outstanding to grow at 40%, which is 58% less than the historical 5-year CAGR
of 96%.

Even with these cautious assumptions, Lok Capital expects MFI

borrowers to increase from 22.6 million to 64 million and portfolio outstanding


to increase from $2 billion to $8 billion by 2012.
With maturity, Micro Finance Institutions will have to begin reassessing
and re-engineering their growth strategies in a couple of years. They will have
to take into account market opportunities and risks and adjust their
geographical exposure, client base and product offering to remain competitive.
Hints of market conditions that Micro Finance Institutions will have to navigate
in the coming years are present even today, and Micro Finance Institutions are
beginning to recognize these factors as they continue to grow. Below we explore
the changing market dynamics in terms geographical spread of microfinance,
client profile and product offerings and evaluate how Micro Finance
Institutions might respond.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 37

3.5 Geographical Spread

Despite the rapid expansion of microfinance, large areas of India


continue to be underserved.

Lok Capital estimates that the penetration

potential of the existing microfinance model is between approximately 43


million and 52 million households, out of which 22.6 million are existing
customers. This implies an unaddressed demand of 20million to 29 million
customers. Currently, as many as 54% of all microfinance clients are
concentrated in the Southern States: Andhra Pradesh, Karnataka, Kerala and
Tamil Nadu.
Alternatively, there is an extremely limited microfinance presence in
the North and North-east. Micro Finance Institutions are beginning to realize,
however, that the South is becoming overly saturated and there is a commercial
need to expand to newer geographies to ensure continued growth and maintain

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 38

the quality of their portfolio. It has become imperative that Micro Finance
Institutions diversify their operational base and limit overexposure to heavily
serviced areas and clients.

The Karnataka episode (detailed below) has

demonstrated the urgent need to re-engineer expansion strategies to avoid overlending to a cluster of clients and hedge against regional disturbances,
economic, political and social.

3.6 Client Profile


We have begun to see greater microfinance activity in states such as
Maharashtra and Madhya Pradesh, but Micro Finance Institutions are
approaching the North and North-east with more caution and hesitancy
because these areas present a very different type of client base compared to
South or Central India. Nonetheless, the trend toward expanding in uncharted
territories will continue, albeit slowly. In addition, Micro Finance Institutions
are trying to start tapping different portions of the low income segment. Thus
far, a very narrow band of the low-income population segment has been served
through microfinance.

There is an ultra-poor segment as well as a wealthier one which have


drastically different needs and capacities from the segment currently being
served.

Small efforts are underway to explore these segments needs and

capacities and evaluate what kind of products and services would allow them
to be brought under the financial inclusion umbrella. For example, with help
from Lok Foundation, Ujjivan is currently participating in a pilot program for
the urban ultra-poor which seeks to equip them with knowledge and skills that
will allow them to eventually avail microfinance services.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 39

Moreover, the government has also of late turned its focus toward
financial inclusion. This means that policy and regulatory attention on
microfinance has increased with the government constituting two high-level
committees to provide suggestions on how to improve the financial inclusion
scenario in India. This new trend will provide impetus to devise strategies for
more inclusive growth that makes commercial as well as social sense.

3.7 Product Offering


Thus far, microfinance institutions have largely limited their
product and service offering even within the confines of financial inclusion. In
fact, their product innovation has been limited to credit which is intended to
serve a variety of needs as shown by the box below. The limited product
innovation is understandable given the sectors primary focus has been on
refining its business model and gaining scale to become financially sustainable.
Despite

following

single-product

model,

the

sector

has

experienced

remarkable growth. This growth can only be expected to continue as product


innovation and diversified service offerings attract and retain greater number of
customers with a variety of needs.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 40

Product

Purpose
Micro Enterprise/Small Business Loan

Existing

Working Capital

Product

Agriculture Loan
Crop/Farm Related
Livestock

New/Niche

Dairy/Poultry

Product

General

Loan

Consumption
Educational

Loan

Vocational
Housing

Loan

New Home

The very same clients that the sector currently serves have a plethora of
alternate needs for basic products and services, financial and non-financial
which can affect sustainable, long-term achievements in their quality of life.
Fortunately,

recognizing

this

pent-up

demand,

mature

Micro

Finance

Institutions are beginning to take concrete steps toward expanding their


product basket, at least within the context of financial services. Along with
credit, Micro Finance Institutions are heavily exploring the possibility of
providing savings/deposit services, micro-insurance and remittance services.

Savings
Access to a savings mechanism like that which is available through
commercial banks, is usually held by the microfinance industry to be the most
urgent need to enhance the economic security of the poor. Due to RBI
Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 41

regulations, Non-Banking Microfinance Company (NBFC) Micro Finance


Institutions cannot currently accept interest-bearing deposits, unless they
provide the service through a Section 25 Business Correspondent conduit.
This structure prohibits the conduit from charging any fees to execute this
function and limits its reach within a limited radius of the bank branch. Micro
Finance Institutions are lobbying the RBI to relax these regulations to allow
NBFCs to operate as business correspondents, charge an extra fee for the
deposit-taking service and delimit the geographical reach of their operations.
These changes would not only make deposits a viable commercial product, but
also allow Micro Finance Institutions to offer it to a broader set of clients.

3.8 Insurance
While credit can serve to enhance a households income, insurance
can serve to cushion the negative economic impact in the event of an
emergency. Without insurance, a single incident can often impoverish a
household, even with access to micro-credit, especially if the emergency affects
the main earning members. A number of Micro Finance Institutions already
offer micro-insurance products to their clients. The most basic products insure
against health and accidental death.

Companies such as Satin and BASIX

usually tie the insurance products to their credit products, which makes the
availability of credit contingent on the client availing insurance. The rationale
behind packaging the loan and insurance together is that often clients do not
understand the importance or benefit of insurance until they face an
emergency. From a commercial viewpoint, the MFI is in effect insuring its loan
against a crisis in the clients household, since insurance hedges against total
financial collapse and thus ensures repayment of the loan, albeit in a delayed
fashion. Similar to customers, BASIX also links livestock loans to livestock
Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 42

insurance for a similar reason it cushions the financial blow and increases
the likelihood of a successful loan recovery. We can expect the number of
insurance products available to increase as Micro Finance Institutions expand
beyond their core credit product and clients become more aware of the benefits
of insurance.

3.9 Remittance
Domestic labor migration has a long history in India and is on the
rise given disparities in growth across states migrants need a fast, low-cost,
convenient, safe and widely accessible money transfer service. In India,
remittance services can be enabled by the provision of savings and thus need
to be provided in tie- ups with banks and post offices. In some cases, Micro
Finance Institutions provide remittance services by establishing their presence
in a migrant destination to channel remittances back to the community in the
migrants area of origin or by establishing a tie-up with another MFI, bank or
money transfer company in the area of origin. Going forward, the role of
technology will become more important in facilitating the development of
alternative channels and payment mechanisms.

3.10 Non-Financial Products


Within product offerings, Micro Finance Institutions are considering
expanding their activities beyond the realm of financial services since this can
provide synergies linked to future expansion. Microfinance clients have myriads
of unmet needs such as healthcare and education as well as livelihood
requirements which can enhance their income, employment potential or quality
of life. Given Micro Finance Institutions existing relationships with this

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 43

population segment, they would be an ideal channel to provide these services.


While Micro Finance Institutions may not want to delve into product lines that
are fundamentally different from their core business, they could easily act as
conduits to allow other agents to deliver these services to their customers. The
microfinance industry as a whole is now experimenting with a wide variety of
potential models that could be used to deliver non-financial services.
For example, BASIX offers a host of alternative services to its clients.
Beyond the basket of credit and other financial products and services, BASIX
also provides low income customers with livelihood services, including
agricultural

and

business

development

consulting

services,

to

help

microfinance clients use their loans more effectively. BASIX offers these
alternative services to its clients through different entities housed under one
umbrella. These groups have tremendous synergy and contribute to each
others growth and prosperity.

The credit business enables customer

acquisition, while the insurance business mitigates risk, and agricultural and
business development service enables customer retention. The consulting and
IT business enhances BASIXs revenues, while the social businesses enable
research and development which contribute to BASIXs strategy development.
In addition to livelihood services, several Micro Finance Institutions are
examining the feasibility of providing critical basic services to deliver low cost
healthcare, education and vocational training. For example, Spandana is
currently developing a comprehensive low cost healthcare delivery model
focused on the healthcare needs of women and children. BASIX has launched a
vocational training academy to impart education in rural development and
management to potential job seekers from low income communities.

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Determinants of GLP and Profitability of selected MFIs | 44

These participants would be deployed in the rural/semi urban areas


with BASIX or other organizations offering financial services to the poor. In
addition to being important avenues for productive utilization of credit by MFI
clients, these types of services have a strong potential to reinforce long-term
client relationships. Most importantly, the evolving delivery model for low cost
education and healthcare has similar operational elements as the highly
successful

microfinance

model

including

efficient

distribution,

high-

throughput and para-skilling of low cost resources to address the last mile
inclusion challenge

3.11 Potential End Game Scenario


Since Micro Finance Institutions asset growth rates may be more
moderate over the medium term, they will need to make strategic choices based
on their capabilities and the competitive environment. National players will
focus on achieving pan-India scale and efficiently

delivering fewer closely-

linked products while regionally focused Micro Finance Institutions will try to
leverage their deeper ties with clients (due to proximity and awareness of local
dynamics) and provide additional services.

3.12 Investment Climate


Today, microfinance is gaining prominence as a viable asset
class globally, particularly in India. Micro Finance Institutions in India have
continued to attract large amounts of capital despite the global economic
recession. Currently, it is reported that over 100 microfinance investment
vehicles (MIVs) exist globally, and India is a focus for many of them due to its
large market size, growth capacity, profitable business models and potential

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Determinants of GLP and Profitability of selected MFIs | 45

development

impact.

Moreover,

mainstream

investors

are

beginning

to

participate in this sector, picking up larger stakes than the social investors that
have been dominant so far. The entrance of mainstream investors is indicative
of an industry that is maturing, but is still expected to grow at a high rate.

Valuations in the microfinance sector reflect this expectation and


surpass that of traditional institutions in the financial services space.
Moreover, Indian Micro Finance Institutions trade at significant premier to
Micro Finance Institutions in other parts of the world.

Micro Finance

Institutions across the world face an equity valuation of 1.5x to 3.0x book
value, whereas Indian Micro Finance Institutions face a valuation that is 3.0x
to 4.0x book value. This premium is driven partly by the generous amounts of
debt available to the industry to expand which in turn enables Micro Finance
Institutions to achieve returns on equity of approximately 20% to 30%.16 These
premium levels are also identical to the premier to book value at which private
sector banks and non-banks have traded in the Indian capital markets which
have averaged over 3.5x to 4.0x book value throughout the last seven to ten
years. In the short run, as mainstream investors gain interest in the Indian
microfinance industry and infuse larger amounts of capital at higher prices,
equity will continue to trade at a premium.

A point to note here is that even though the microfinance industry is


reaching maturity, the large amounts of untapped geographical territory and
client base combined with the Micro Finance Institutions wide network create
potential for enormous sustainable growth in the future. As discussed earlier,
Micro Finance Institutions and other service providers are beginning to realize
the significant value of the network that has been created by Micro Finance
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Determinants of GLP and Profitability of selected MFIs | 46

Institutions and efforts are underway to utilize them to deliver both, financial
and non- financial products and services. These factors will continue to impact
the supply of equity for Indian microfinance and hence the equity valuations.
Furthermore, since this untapped demand is unlikely to be satisfied in the
short or medium term, while valuations will be tempered by cautious investors,
premier driven by fundamental growth expectations can be expected to prevail
through the short and medium term as Micro Finance Institutions re-engineer
their strategies to take advantage of the unsatisfied microloan demand.

3.13 Exits
For early stage investors like Lok, the most likely source of exit
remains secondary or trade sales. Given the multiple rounds of capital raisings
that fast growing MFIs need to complete and the increasing investor interest
(including from large commercial investors) in taking direct exposure to Indian
microfinance institutions, there is significant opportunity for early-stage,
nimble investors to sell their stake in subsequent rounds. For example, as part
of Spandanas current capital raise of approximately $40 million from
mainstream investors, Lok is doing a partial exit of its shareholding in the
company, realizing a cash on cash multiple of 8x on the shares sold. Early
stage investor Kalpathi Suresh recently sold a 10% stake in Equities to Sequoia
Capital, generating over 12x returns, demonstrating that it is possible for
minority investors to successfully exit their microfinance investments.

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Determinants of GLP and Profitability of selected MFIs | 47

In terms of potential M&A exit scenarios, the most likely scenario is


the entry of banks as acquirers in the medium term with the RBIs and the
governments emphasis on using banks to deliver more effective financial
inclusion they could leverage MFIs as the last-mile distribution platform for
the existing banking system. Banks could potentially find it easier to complete
acquisitions compared to large MFIs as they are less promoter driven and have
better institutional capacity to integrate acquisitions. Acquisitions of regional
MFIs by large national MFIs is also possible given certain conditions the
regional MFI would need to have strong penetration in its local market, a
similar basic operating model as the acquiring MFI and a certain minimum
portfolio size of approximately $50 million to $75 million. The MFI sector could
also see a merger of equals between two mid to large sized MFIs as the industry
matures and consolidates over the medium term.

Some large MFIs including two to three in Lok Capitals portfolio could
consider a potential listing in one to two years, but IPOs will be a challenge for
the sector overall given limited market experience in listing socially-focused
firms. Criteria for a successful IPO will include size; the capacity to absorb
large amounts of capital and generate post-issue liquidity of the listed shares;
operating experience of the management team; track-record of value creation;
and institutional capacity to deal with the listing process, compliance
requirements and public scrutiny. In this regard, the experience of SKS
Microfinance in executing its proposed IPO in 2010 will be a useful learning
experience for the microfinance sector to determine the extent to which a social
business model such as microfinance can be accepted by mainstream and
particularly retail investors, and the value these investors are willing to ascribe
to its potential.
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Determinants of GLP and Profitability of selected MFIs | 48

That exits are still uncommon in microfinance means that for early
stage investors like Lok, entrepreneurs need to be made aware of their exit
obligations, and investors relationships with entrepreneurs will be key in
realizing exits, especially for minority shareholders. The ability to work with
different mainstream investors, MFI promoters, banks and industry regulators
as well as investors prior experience and track-record of executing exits in the
Indian market will be the key to completing successful exits in Indian
microfinance companies.

3.14 Profile of Micro Finance Institutions


3.14.1 Asmitha Micro fin Limited
Asmitha Micro fin Ltd. (AML), an NBFC, began its microfinance
operations in 2002; it is one of the top five microfinance institutions (MFIs) in
India, in terms of loans outstanding. AML lends to five-member groups of

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Determinants of GLP and Profitability of selected MFIs | 49

women under the Grameen Bank model, at a flat interest rate of 12.5 per cent
to 15 per cent, and charges an upfront one-time processing fee of 1.15 to 2.50
per cent of the loan amount.
AML has a strong rural presence. Most of the loans are given for incomegeneration activities; trading and animal husbandry account for about twothirds of AML's loans. As of March 31, 2008, AML was present in Orissa,
Andhra Pradesh, Karnataka, and Maharashtra: it has ventured into nine more
states during the first half of 2008-09 (refers to financial year, April 1 to March
31).

3.14.2 Bhartiya Samruddhi Finance Ltd.


Bhartiya Samruddhi Finance Ltd. (BSFL), an NBFC promoted by
Bhartiya Samruddhi Investments and Consulting Services Ltd. (BASICS),
started operations in 1997. BSFL is one of the pioneers in extending organized
microfinance to those without access to banking and financial services. The
company has more than a decade of experience in microfinance, and has
disbursed more than Rs.11 billion of loans since inception. BSFL adopts
diverse lending models (loans to individuals, joint-liability groups of farmers
and federations of women SHGs. The company is the first Indian MFI to offer
weather-based insurance to customers through a tie-up with an insurance
company, and the first MFI with an institutional shareholding structure.
BSFL provides microfinance and knowledge-based technical assistance.
Its customers include small and marginal farmers, rural artisans, microenterprises, and federations and cooperatives owned by self-help groups
(SHGs). As on September 30, 2008, it had a presence in 8 states across India.

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Determinants of GLP and Profitability of selected MFIs | 50

3.14.3 BSS Microfinance Ltd


BSS Microfinance Pvt. Ltd. (BMPL), formerly Oyster Capitals Pvt Ltd, is a
Bangalore-based non-banking financial company (NBFC) which started its
microfinance operations in April 2008 by taking over the operations of
Bharatha Swamukti Samsthe (BSS), an MFI registered as a trust. BSS was
founded by Mr. K. S. Nagendra in 1997. BSS received its first external loan for
its microfinance program from Grameen Trust, Bangladesh, in January 1998.
BMPL follows the Grameen Bank model of lending and offers loans at 15
per cent (flat rate basis) to women organized as joint liability groups (JLGs). In
May 2007, it also launched an individual loan product on a pilot basis.

3.14.4 Cashpor Micro Credit


Cashpor Micro Credit (Cashpor) is a not-for-profit company based out of
Varanasi, Uttar Pradesh. Under the banking correspondence model, Cashpor
acts as a sourcing agent for banks; the loans are originated directly in banks
books. Cashpor provides a first loss default guarantee on the portfolio sourced
by it while receiving a sourcing fee (difference between the interest paid by the
borrower and interest paid to the bank) from such business. The company was
operating through a network of 341 branches spread across 31 districts as on
December 31, 2013.

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Determinants of GLP and Profitability of selected MFIs | 51

3.14.5 SKS Microfinance Ltd.


SKS

Microfinance

Ltd.

(SKSMPL)

is

India's

largest

microfinance

institution (MFI) with a member base of 3 million borrowers as on September


30, 2008. It was incorporated as a private limited company in 2003 for taking
over the microfinance activities of Swayam Krishi Sangam (SKS), a society that
was registered in 1997 and began operations in 1998. After obtaining the nonbanking financial company (NBFC) license from the Reserve Bank of India in
January 2006, SKSMPL took over the operations of SKS. The company's
microfinance operations are spread over 15 states and one union territory as
on September 30, 2008.
The company follows the group-lending model, which closely resembles
Bangladesh-based Grameen Bank's model. While group loans have a tenure of
50 weeks, individual loans bear a term of 12 to 24 months. SKSMPL charges
an interest rate of 23.6 per cent on a declining method basis in Andhra
Pradesh and Karnataka and 28 per cent in other states.

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Determinants of GLP and Profitability of selected MFIs | 52

4. ANALYSIS AND INTERPRETATION


4.1 GLPTA
Table No. 4.1.1
Table showing Descriptive Statistics of GLPTA of Asmitha
Microfinance Ltd (AML)
Minimum

Maximum

Mean

Std. Deviation

GLPTA

.80

2.52

1.1550

.61600

CAR

-.64

.34

.0010

.28061

DER

-3.95

22.18

7.4670

7.87946

OE

.05

.12

.0800

.02309

PE

.03

.09

.0520

.01932

AE

.02

.05

.0310

.01197

PAR

.61

.97

.7630

.14275

TE

.13

.63

.2320

.14405

FE

.05

.11

.0830

.01889

Valid N (listwise)
Interpretation:
Table 4.4.1 represents descriptive statistics of Asmitha Microfinance Ltd
(AML) for the variables used in the estimates of the present study. The data are
collected from the Mix market database relating to Micro finance in India.
Summary statistics in the above table include the minimum, maximum, mean
and the standard deviation for period 2004 2013. The minimum value of
-3.95 is found in DER and GLPTA have the maximum value of .80. DER shows
Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 53

a highest mean value of 7.4670 and also shows the highest value of standard
deviation 7.87946.

Table No. 4.1.2


Table showing Correlation Matrix of GLPTA of Asmitha
Microfinance Ltd (AML)
GLPT
A
Pearson
GLPT Correlation
Sig. (2-tailed)
A
N
Pearson
Correlation
CAR
Sig. (2-tailed)
N
Pearson
Correlation
DER
Sig. (2-tailed)
N
Pearson
Correlation
OE
Sig. (2-tailed)
N
Pearson
Correlation
PE
Sig. (2-tailed)
N
Pearson
Correlation
AE
Sig. (2-tailed)
N
Pearson
Correlation
PAR
Sig. (2-tailed)
N

CAR

DER

OE

PE

AE

1 -.919** -.745* -.087 -.332


10

.000
10

-.919**

.013
10

.812
10

.348
10

PAR

TE

FE

.252 -.561

.507 -.050

.482
10

.135
10

.891
10

.092
10

.493 -.113

.174 -.430

.330 -.375

.245

.756
10

.631
10

.215
10

.352
10

.496
10

.000
10

10

.148
10

-.745*

.493

.472

.617

.178 .834** -.515 -.487

.013
10

.148
10

10

.169
10

.057
10

.622
10

-.087 -.113

.472

1 .896** .884**

.812
10

.756
10

.169
10

10

.000
10

-.332

.174

.617 .896**

.348
10

.631
10

.057
10

.001
10

10

.037
10

.252 -.430

.178 .884**

.663*

.482
10

.622
10

.037
10

10

.330 .834**

.691* .860**

.453

.352
10

.027
10

.188
10

-.561
.092
10

.003
10

Jagadeesh T - Department of Commerce - SKASC

.001
10

.001
10

.128
10

.154
10

.691* -.271 -.560


.027
10

.450
10

.092
10

.663* .860** -.177 -.627

.000
10

.215
10

.003
10

.285
10

.001
10

.624
10

.052
10

.453 -.317 -.506


.188
10

.372
10

.135
10

1 -.396 -.721*
10

.257
10

.019
10

Determinants of GLP and Profitability of selected MFIs | 54

TE

FE

Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)
N

.507 -.375 -.515 -.271 -.177 -.317 -.396


.135
10
-.050
.891
10

.047

.257
10

10

.898
10

.245 -.487 -.560 -.627 -.506 -.721*

.047

.496
10

.898
10

10

.285
10

.128
10

.154
10

.450
10

.092
10

.624
10

.052
10

.372
10

.135
10

.019
10

Interpretation:
Table 4.1.2 presents the Pearson correlation coefficients for the
variables used in the study. Linear regressions were run in SPSS using the
Enter Method to test the set hypotheses or more clearly to test how the
independent variables explain the GLPTA (Dependent Variable). Table 4.1.2
depicts that the highest correlation coefficient value of variable is 0.896. CAR
are showing significant relationship with the dependent variable GLPTA.

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Determinants of GLP and Profitability of selected MFIs | 55

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 56

Table No. 4.1.3


Table showing Regression Coefficient of GLPTA of Asmitha
Microfinance Ltd (AML)
Model Summary
Model
R
R Square Adjusted R Square Std. Error of the Estimate
.992
.985
.861
.22987
1
a. Predictors: (Constant), FE, TE, CAR, OE, DER, PAR, PE, AE
Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around
98.5% of the variation in the dependent variable / GLPTA. The adjusted
explanation of the model is about 86.1%. The F value which is a measure of
overall significance of the estimated regression and also a test of significance of
R2 is 7.954.
ANOVA
Model
Sum of Squares
d.f
Mean Square
F
Sig.
3.362
8
.420
7.954
.268
Regression
.053
1
.053
1
Residual
3.415
9
Total
a. Predictors: (Constant), FE, TE, CAR, OE, DER, PAR, PE, AE
b. Dependent Variable: GLPTA
Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on GLPTA is significant. At 95% confidence level, the
critical value obtained from F table is 2.87.The calculated value is 7.954 which
is greater than the tabular value and falls in the rejection region. Therefore, we

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Determinants of GLP and Profitability of selected MFIs | 57

can say that there is no significant relationship between dependent variable


GLPTA and their determinants of Asmitha Microfinance Ltd (AML).

Coefficients
Model

Unstandardized
Coefficients

Standardize
d
Coefficients

Sig.

1.515

.371

Std. Error

Beta

(Constant)

3.871

2.555

CAR

-1.301

2.094

-.593

-.621

.646

DER

-.023

.037

-.295

-.629

.642

OE

-6.712

19.896

-.252

-.337

.793

PE

14.178

46.790

.445

.303

.813

AE

4.120

79.471

.080

.052

.967

PAR

-2.610

2.642

-.605

-.988

.504

TE

-.243

3.606

-.057

-.067

.957

FE

-9.909

10.168

-.304

-.975

.508

a. Dependent Variable: GLPTA

Interpretation:
The above table presents the estimated results. The regression was run
with GLPTA as dependent and CAR, DER, OE, PE, AE, PAR, TE and FE as
independent variables. With GLPTA as dependent variable there is no
significant relationship with the determinants of GLPTA. PE and AE is found to
have positive co-efficient which shows that this variable has an inverse impact
on this dependent variable GLPTA.

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Determinants of GLP and Profitability of selected MFIs | 58

Table No. 4.1.4


Table showing Descriptive Statistics of GLPTA of Bhartiya
Samruddhi Finance Ltd (BSFL)

Minimum

Maximum

Mean

Std. Deviation

GLPTA

.57

1.66

.9120

.29966

CAR

-1.04

.35

-.0470

.44239

DER

-2.49

28.02

6.2880

8.48081

PE

.04

.12

.0830

.02541

PAR

.41

.80

.5930

.10791

TE

.18

.74

.3360

.19867

FE

.04

.14

.0800

.02981

Valid N (listwise)
Interpretation:

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Determinants of GLP and Profitability of selected MFIs | 59

Table 4.1.4 represents descriptive statistics of Bhartiya Samruddhi


Finance Ltd (BSFL) for the variables used in the estimates of the present study.
The data are collected from the Mix market database relating to Micro finance
in India. Summary statistics in the above table include the minimum,
maximum, mean and the standard deviation for period 2004 2013. The
minimum value of -2.49 is found in DER and GLPTA have the maximum value
of 28.02. DER shows a highest mean value of 6.2880 and also shows the
highest value of standard deviation 8.48081.

Table No. 4.1.5


Table showing Correlation Matrix of GLPTA of Bhartiya
Samruddhi Finance Ltd (BSFL)

GLPTA

Pearson
Correlation

PE

OE

PE

AE

PAR

TE

FE

-.444

.011

.973**

.809**

.970**

.166

.562

.067

.199

.977

.000

.005

.000

.646

.091

.854

10

10

10

10

10

10

10

10

10

-.444

.393

-.412

-.310

-.440

.323

Sig. (2-tailed)

.199

.261

.236

.383

.203

.363

.000

.014

-.919** -.741*

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.011

.393

.175

.283

.105

.157

-.065

-.250

Sig. (2-tailed)

.977

.261

.628

.428

.772

.666

.858

.487

N
OE

DER

Pearson
Correlation
N

DER

CAR

Sig. (2-tailed)
N

CAR

GLPTA

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.973**

-.412

.175

.887**

.964**

.215

.582

-.011

Sig. (2-tailed)

.000

.236

.628

.001

.000

.551

.077

.976

10
.809**

10
-.310

10
.283

10
1

10
.737*

10
.021

10
.502

10
-.132

Pearson
Correlation

Jagadeesh T - Department of Commerce - SKASC

10
.887**

Determinants of GLP and Profitability of selected MFIs | 60


Sig. (2-tailed)

.005

.383

.428

.001

.015

.955

.139

.716

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.970**

-.440

.105

.964**

.737*

.298

.580

.073

Sig. (2-tailed)

.000

.203

.772

.000

.015

.402

.079

.842

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.166

.323

.157

.215

.021

.298

-.332

-.594

Sig. (2-tailed)

.646

.363

.666

.551

.955

.402

.349

.070

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.562

-.919**

-.065

.582

.502

.580

-.332

.668*

Sig. (2-tailed)

.091

.000

.858

.077

.139

.079

.349

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.067

-.741*

-.250

-.011

-.132

.073

-.594

.668*

Sig. (2-tailed)

.854

.014

.487

.976

.716

.842

.070

.035

10

10

10

10

10

10

10

10

N
AE

N
PAR

N
TE

N
FE

.035

10

Interpretation:
Table 4.1.5 presents the Pearson correlation coefficients for the
variables used in the study. Linear regressions were run in SPSS using the
Enter Method to test the set hypotheses or more clearly to test how the
independent variables explain the GLPTA (Dependent Variable). Table 4.1.5
depicts that the highest correlation coefficient value of variable is 0.973. OE
and AE are showing significant relationship with the dependent variable
GLPTA.

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Determinants of GLP and Profitability of selected MFIs | 61

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 62

Table No. 4.1.6


Table showing Regression Coefficient of GLPTA of Bhartiya
Samruddhi Finance Ltd (BSFL)
Model Summary
Model
1

Std. Error of the


Estimate
.999
.997
.974
.04836
a. Predictors: (Constant), FE, OE, DER, PAR, TE, PE, CAR, AE
R

R Square

Adjusted R Square

Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around
99.7% of the variation in the dependent variable (GLPTA). The adjusted
explanation of the model is about 97.4%. The F value which is a measure of
overall significance of the estimated regression and also a test of significance of
R2 is 43.063.
ANOVA
Sum of
Mean
d.f
F
Sig.
Squares
Square
.806
8
.101
43.063
.117
Regression
.002
1
.002
Residual
.808
9
Total
a. Predictors: (Constant), FE, OE, DER, PAR, TE, PE, CAR, AE
b. Dependent Variable: GLPTA

Model
1

Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on GLPTA is significant. At 95% confidence level, the
critical value obtained from F table is 2.87.The calculated value is 43.063

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Determinants of GLP and Profitability of selected MFIs | 63

which is greater than the tabular value and falls in the rejection region.
Therefore, we can say that there is no significant relationship between
dependent variable GLPTA and other determinants of Bhartiya Samruddhi
Finance Ltd (BSFL).
Coefficients

Model

Unstandardized
Coefficients

Standardize
d
Coefficients

Sig.

.285

.823

Std. Error

Beta

(Constant)

.163

.570

CAR

.140

.312

.206

.448

.732

DER

-.008

.006

-.215

-1.254

.429

OE

.385

5.775

.086

.067

.958

PE

3.605

6.499

.306

.555

.678

AE

5.350

5.598

.825

.956

.514

PAR

-.194

.441

-.070

-.439

.736

TE

-.104

.585

-.069

-.178

.888

FE

1.534

2.045

.153

.750

.590

a. Dependent Variable: GLPTA


Interpretation:
The above table presents the estimated results. The regression was run
with GLPTA as dependent and CAR, DER, OE, PE, AE, PAR, TE, and FE as
independent variables. With GLPTA as dependent variable there is no
significant relationship with the determinants of GLPTA. DER, PAR and TE is
having negative co-efficient which shows that these variable has an inverse
impact on this dependent variable GLPTA.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 64

Table No. 4.1.7


Table showing Descriptive Statistics of GLPTA of Bharatha
Swamukti Samsthe (BSS)
Minimum

Maximum

Mean

Std. Deviation

GLPTA

.70

.93

.8240

.07792

CAR

.08

.21

.1660

.03565

DER

3.76

11.07

5.4340

2.08152

OE

.07

.15

.1080

.02573

PE

.05

.09

.0640

.01430

AE

.02

.07

.0460

.01430

PAR

.54

.89

.7560

.12817

TE

.18

.25

.2090

.02378

FE

.06

.11

.0860

.01713

Valid N (listwise)
Interpretation:
Table 4.1.7 represents descriptive statistics of Bharatha Swamukti
Samsthe (BSS) for the variables used in the estimates of the present study. The
data are collected from the Mix market database relating to Micro finance in
India. Summary statistics in the above table includes the minimum, maximum,
mean and the standard deviation for period 2004 2013. The minimum value
of .02 is found in AE and DER have the maximum value of 11.07. DER shows a
highest mean value of 5.4340 and also shows the highest value of standard
deviation 2.08152.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 65

Table No. 4.1.8


Table showing Correlation Matrix of GLPTA of Bharatha
Swamukti Samsthe (BSS)

GLPTA

GLPTA

CAR

DER

OE

PE

AE

PAR

TE

FE

-.614

.600

-.300

-.624

.166

.351

-.082

-.303

.059

.067

.399

.054

.648

.320

.823

.395

10

10

10

10

10

10

10

10

10

Pearson
Correlation

-.614

-.968**

.039

.318

-.253

-.322

-.045

.571

Sig. (2-tailed)

.059

.000

.915

.370

.481

.364

.903

.084

Pearson
Correlation
Sig. (2-tailed)
N

CAR

N
DER

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.600

-.968**

-.110

-.378

.163

.212

-.004

-.561

Sig. (2-tailed)

.067

.000

.762

.281

.652

.556

.992

.092

10

10

10

10

10

10

10

10

10

Pearson
Correlation

-.300

.039

-.110

.870**

.852**

.301

.868**

-.323

Sig. (2-tailed)

.399

.915

.762

.001

.002

.399

.001

.363

10

10

10

10

10

10

10

10

10

Pearson
Correlation

-.624

.318

-.378

.870**

.522

.076

.569

-.154

Sig. (2-tailed)

.054

.370

.281

.001

.122

.834

.086

.670

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.166

-.253

.163

.852**

.522

.584

.902**

-.481

Sig. (2-tailed)

.648

.481

.652

.002

.122

.076

.000

.159

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.351

-.322

.212

.301

.076

.584

.392

-.388

Sig. (2-tailed)

.320

.364

.556

.399

.834

.076

.262

.268

10

10

10

10

10

10

10

10

10

Pearson
Correlation

-.082

-.045

-.004

.868**

.569

.902**

.392

-.338

Sig. (2-tailed)

.823

.903

.992

.001

.086

.000

.262

10

10

10

10

10

10

10

10

10

Pearson
Correlation

-.303

.571

-.561

-.323

-.154

-.481

-.388

-.338

Sig. (2-tailed)

.395

.084

.092

.363

.670

.159

.268

.339

10

10

10

10

10

10

10

10

N
OE

N
PE

N
AE

N
PAR

N
TE

N
FE

Jagadeesh T - Department of Commerce - SKASC

.339

10

Determinants of GLP and Profitability of selected MFIs | 66

Interpretation:
Table 4.1.8 presents the Pearson correlation coefficients for the
variables used in the study. Linear regressions were run in SPSS using the
Enter Method to test the set hypotheses or more clearly to test how the
independent variables explain the GLPTA (Dependent Variable). Table 4.1.8
depicts that the highest correlation coefficient value of variable is 0.902.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 67

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 68

Table No. 4.1.9


Table showing Regression Coefficient of GLPTA of Bharatha
Swamukti Samsthe (BSS)
Model Summary
Model R R Square Adjusted R Square
Std. Error of the Estimate
.917
.840
-.437
.09340
1
a. Predictors: (Constant), FE, PE, PAR, TE, CAR, AE, DER, OE
Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around 84%
of the variation in the dependent variable (GLPTA). The adjusted explanation of
the model is about 43.7%. The F value which is a measure of overall
significance of the estimated regression and also a test of significance of R 2 is
0.658.

ANOVA
Model
1

Regression
Residual

Sum of Squares

d.f

Mean Square

Sig.

.046

.006

.658

.747

.009
1
.009
Total
.055
9
a. Predictors: (Constant), FE, PE, PAR, TE, CAR, AE, DER, OE
b. Dependent Variable: GLPTA

Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on GLPTA is significant. At 95% confidence level, the
critical value obtained from F table is 2.87.The calculated value is 0.658 which
is lesser than the tabular value and falls in the rejection region. Therefore, we

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 69

can say that there is a significant relationship between dependent variable


GLPTA and their determinants of Bharatha Swamukti Samsthe (BSS).

Coefficients
Model

Unstandardized
Coefficients

Standardize
d
Coefficients

Sig.

.966

.511

Std. Error

Beta

(Constant)

1.395

1.443

CAR

.317

4.281

.145

.074

.953

DER

.004

.074

.112

.056

.964

OE

1.296

12.992

.428

.100

.937

PE

-6.144

14.231

-1.127

-.432

.741

AE

6.651

11.533

1.220

.577

.667

PAR

-.038

.381

-.063

-.101

.936

TE

-3.004

4.978

-.917

-.604

.654

FE

-.487

2.936

-.107

-.166

.895

a. Dependent Variable: GLPTA


Interpretation:
The above table presents the estimated results. The regression was run
with GLPTA as dependent and CAR, DER, OE, PE, AE, PAR, TE and FE as
independent variables. With GLPTA as dependent variable there is no
significant relationship with the determinants of GLPTA. CAR, DER, OE, and
AE is found to have positive co-efficient which shows that this variable has an
inverse impact on this dependent variable GLPTA.
Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 70

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 71

Table No. 4.1.10


Table showing Descriptive Statistics of GLPTA of Cashpor Micro
Credit (CASHPOR MC)

Minimum

Maximum

Mean

Std. Deviation

GLPTA

.70

1.21

.9220

.13959

CAR

.00

.08

.0380

.03521

DER

-77.52

225.78

43.3640

79.52993

OE

.08

.22

.1290

.04508

PE

.05

.14

.0880

.02860

AE

.02

.08

.0390

.01969

PAR

.62

.81

.7000

.05981

TE

.18

.31

.2330

.03945

FE

.07

.12

.1030

.01636

Valid N (listwise)

Interpretation:
Table 4.1.10 represents descriptive statistics of Cashpor Micro Credit
(CASHPOR MC) for the variables used in the estimates of the present study.
The data are collected from the Mix market database relating to Micro finance
in India. Summary statistics in Table10 include the minimum, maximum,
mean and the standard deviation for period 2004 2013. DER shows the
minimum value of -77.52 and maximum value of 225.78. Also DER shows a
highest mean value of 43.3640 and the highest value of standard deviation
79.52993.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 72

Table No. 4.1.11


Table showing Correlation Matrix of GLPTA of Cashpor Micro
Credit (CASHPOR MC)
GLPTA
GLPTA

Pearson
Correlation

FE

-.504

.537

.721

.494

.104

.078

.222

.054

.138

.109

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.130

-.325 -.652*

-.622

-.564 -.786**

-.507

.590

Sig. (2-tailed)

.721

Sig. (2-tailed)

.359

.041

.055

.089

.007

.135

.073

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.246

-.325

.052

.033

.070

-.072

.203

.388

Sig. (2-tailed)

.494

.359

.887

.929

.848

.843

.575

.268

10

10

10

10

10

10

10

10

10

-.543 -.652*

.052

.981**

.975**

.766**

.000

.000

.010

.000

.023

10

10

Pearson
Correlation
Sig. (2-tailed)
Pearson
Correlation
Sig. (2-tailed)
Pearson
Correlation
Sig. (2-tailed)
Pearson
Correlation
Sig. (2-tailed)
N

TE

TE

-.624

N
PAR

PAR

-.424

N
AE

AE

-.581

N
PE

PE

-.543

N
OE

OE

.246

N
DER

DER

.130

N
CAR

CAR

Pearson
Correlation

.933** -.703*

.104

.041

.887

10

10

10

10

10

10

10

-.581

-.622

.033

.981**

.943**

.747*

.078

.055

.929

.000

.000

.013

.000

.042

10

10

10

10

10

10

10

10

10

-.424

-.564

.070

.975**

.943**

.623

.934**

-.610

.222

.089

.848

.000

.000

.055

.000

.061

10

10

10

10

10

10

10

10

10

-.624 -.786**

-.072

.766**

.747*

.623

.054

.007

.843

.010

.013

.055

10

10

10

10

10

10

-.504

-.507

.203

.933**

.951**

.934**

Jagadeesh T - Department of Commerce - SKASC

.951** -.651*

.556 -.897**
.095

.000

10

10

10

.556

-.429

Determinants of GLP and Profitability of selected MFIs | 73


Sig. (2-tailed)

.138

.135

.575

.000

.000

.000

.095

10

10

10

10

10

10

10

10

10

Pearson
Correlation

.537

.590

.388 -.703* -.651*

-.610 -.897**

-.429

Sig. (2-tailed)

.109

.073

.268

.023

.042

.061

.000

.217

10

10

10

10

10

10

10

10

N
FE

.217

10

Interpretation:
Table 4.1.11 presents the Pearson correlation coefficients for the
variables used in the study. Linear regressions were run in SPSS using the
Enter Method to test the set hypotheses or more clearly to test how the
independent variables explain the GLPTA (Dependent Variable). Table 4.1.11
depicts that the highest correlation coefficient value of variable is 0.981. OE,
PE and AE are showing significant relationship with the dependent variable
GLPTA.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 74

Table No. 4.1.12


Table showing Regression Coefficient of GLPTA of Cashpor
Micro Credit (CASHPOR MC)
Model Summary
Model
R
R Square Adjusted R Square Std. Error of the Estimate
1
.997
.995
.951
.03099
a. Predictors: (Constant), FE, DER, TE, CAR, PAR, AE, PE, OE
Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around
99.5% of the variation in the dependent variable / GLPTA. The adjusted
explanation of the model is about 95.1%. The F value which is a measure of
overall significance of the estimated regression and also a test of significance of
R2 is 22.704.

ANOVA
Model
Sum of Squares
d.f
Mean Square
F
Sig.
.174
8
.022
22.704
.161
Regression
.001
1
.001
Residual
.175
9
Total
a. Predictors: (Constant), FE, DER, TE, CAR, PAR, AE, PE, OE
b. Dependent Variable: GLPTA

Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on GLPTA is significant. At 95% confidence level, the

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 75

critical value obtained from F table is 2.87.The calculated value is 22.704


which is greater than the tabular value and falls in the rejection region.
Therefore, we can say that there is no significant relationship between
dependent variable GLPTA and other determinants of Cashpor Credit
(CASHPOR MC).

Coefficients
Model

Unstandardized
Coefficients

Standardized
Coefficients

Sig.

5.877

.107

Std. Error

Beta

(Constant)

19.062

3.244

CAR

-6.909

.927

-1.743

-7.454

.085

DER

.002

.000

1.081

4.101

.152

OE

49.335

12.464

15.933

3.958

.158

PE

7.508

3.506

1.538

2.142

.278

AE

-86.229

21.076

-12.165

-4.091

.153

PAR

-22.486

4.212

-9.636

-5.339

.118

TE

-10.307

2.855

-2.913

-3.611

.172

FE

-33.779

7.136

-3.960

-4.733

.133

a. Dependent Variable: GLPTA

Interpretation:
The above table presents the estimated results. The regression was run
with GLPTA as dependent and CAR, DER, OE, PE, AE, PAR, TE, and FE as
independent variables. With GLPTA as dependent variable there is no
significant relationship with the determinants of GLPTA. DER, OE and PE is

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 76

having positive co-efficient which shows that these variable has an inverse
impact on this dependent variable GLPTA.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 77

Table No. 4.1.13


Table showing Descriptive Statistics of GLPTA of Swayam
Krishi Sangam (SKS)

Minimum

Maximum

Mean

Std. Deviation

GLPTA

.77

1.36

.9440

.18644

CAR

.01

.42

.2030

.10339

DER

1.38

119.88

15.5140

36.69622

OE

.08

.14

.1130

.01767

PE

.05

.09

.0660

.01430

AE

.03

.06

.0440

.00843

PAR

.56

.91

.6740

.12773

TE

.17

.61

.2560

.13566

FE

.06

.12

.0840

.01713

Valid N (listwise)
Interpretation:
Table 4.1.13 represents descriptive statistics of Swayam Krishi Sangam
(SKS) for the variables used in the estimates of the present study. The data are
collected from the Mix market database relating to Micro finance in India.
Summary statistics in the above table include the minimum, maximum, mean
and the standard deviation for period 2004 2013. The minimum value of 0.01
is found in CAR and DER have the maximum value of 119.88. DER shows a
highest mean value of 15.5140 and also shows the highest value of standard
deviation 36.69622.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 78

Table No. 4.1.14


Table showing Correlation Matrix of GLPTA of Swayam Krishi
Sangam (SKS)

GLPTA

CAR

DER

OE

PE

AE

PAR

Pearson
Correlation
Sig. (2tailed)
N
Pearson
Correlation
Sig. (2tailed)
N
Pearson
Correlation
Sig. (2tailed)
N
Pearson
Correlation
Sig. (2tailed)
N
Pearson
Correlation
Sig. (2tailed)
N
Pearson
Correlation
Sig. (2tailed)
N
Pearson
Correlation
Sig. (2tailed)
N

GLPTA

CAR

DER

OE

PE

AE

PAR

TE

FE

.262

-.226

.576

.519

.604

-.458

.181

.175

.464

.530

.081

.124

.065

.184

.617

.628

10

10

10

10

10

10

10

10

.262

10
-.681
*

.007

.257

-.206

-.512

.134

-.146

.030

.985

.473

.567

.131

.712

.688

10

10

10

10

10

10

10

.126

-.159

.244

.634*

.024

.722*

.728

.661

.497

.049

.947

.018

.464
10
-.226

10
-.681
*

.530

.030

10

10

10

10

10

10

10

10

10

.576

.007

.126

.800**

.731*

-.331

.576

.323

.081

.985

.728

.005

.016

.350

.082

.363

10

10

10

10

10

10

10

10

10

.519

.257

-.159

.800**

.240

-.361

.804**

.163

.124

.473

.661

.005

.505

.305

.005

.652

10

10

10

10

10

10

10

10

10

.604

-.206

.244

.731*

.240

-.233

-.033

.262

.065

.567

.497

.016

.505

.517

.928

.465

10

10

10

10

10

10

10

10

10

-.458

-.512

.634*

-.331

-.361

-.233

-.061

.292

.184

.131

.049

.350

.305

.517

.868

.414

10

10

10

10

10

10

10

10

Jagadeesh T - Department of Commerce - SKASC

10

Determinants of GLP and Profitability of selected MFIs | 79

TE

FE

Pearson
Correlation
Sig. (2tailed)
N
Pearson
Correlation
Sig. (2tailed)
N

.181

.134

.024

.576

.804**

-.033

-.061

.617

.712

.947

.082

.005

.928

.868

10

10

10

10

10

10

10

10

10

.175

-.146

.722*

.323

.163

.262

.292

.118

.628

.688

.018

.363

.652

.465

.414

.746

10

10

10

10

10

10

10

10

.118
.746

10

Interpretation:
Table 4.1.14 presents the Pearson correlation coefficients for the
variables used in the study. Linear regressions were run in SPSS using the
Enter Method to test the set hypotheses or more clearly to test how the
independent variables explain the Dependent Variable (GLPTA). Table 4.1.14
depicts that the highest correlation coefficient value of variable is 0.804.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 80

Table No. 4.1.15


Table showing Regression Coefficient of GLPTA of SKS
Model Summary
Model R
R Square Adjusted R Square
Std. Error of the Estimate
1
.964
.930
.368
.14817
a. Predictors: (Constant), FE, TE, CAR, AE, PAR, PE, DER, OE
Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around
93.0% of the variation in the dependent variable (GLPTA). The adjusted
explanation of the model is about 36.8%. The F value which is a measure of
overall significance of the estimated regression and also a test of significance of
R2 is 1.656.

ANOVA
Model
Sum of Squares
d.f
Mean Square
F
.291
8
.036
1.656
Regression
.022
1
.022
Residual
.313
9
Total
a. Predictors: (Constant), FE, TE, CAR, AE, PAR, PE, DER, OE
b. Dependent Variable: GLPTA

Sig.
.541

Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on GLPTA is significant. At 95% confidence level, the
critical value obtained from F table is 2.87.The calculated value is 1.656 which
is greater than the tabular value and falls in the rejection region. Therefore, we
Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 81

Coefficients
Model

Unstandardized
Coefficients

Standardized
Coefficients

Sig.

-.016

.990

Std. Error

Beta

(Constant)

-.013

.811

CAR

-.617

1.011

-.342

-.611

.651

DER

-.006

.005

-1.133

-1.106

.468

OE

-25.705

15.320

-2.436

-1.678

.342

PE

15.324

13.369

1.175

1.146

.457

AE

45.935

20.192

2.078

2.275

.264

PAR

-.060

.632

-.041

-.096

.939

TE

.918

.968

.668

.949

.517

FE

10.113

7.593

.929

1.332

.410

a. Dependent Variable: GLPTA


can say that there is no significant relationship between dependent variable
GLPTA and other determinants of Swayam Krishi Sangam (SKS).

Interpretation:
The above table presents the estimated results. The regression was run
with GLPTA as dependent and CAR, DER, OE, PE, AE, PAR, TE, and FE as
independent variables. With GLPTA as dependent variable there is no
significant relationship with the determinants of GLPTA. PE, AE, TE and FE is

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 82

having positive co-efficient which shows that these variable has an inverse
impact on this dependent variable GLPTA.

4.2 PM
Table No. 4.2.1
Table showing Descriptive Statistics of PM of Asmitha
Microfinance Ltd (AML)

Minimum

Maximum

Mean

Std. Deviation

PM

-4.30

.32

-.4890

1.43203

ROA

-.51

.05

-.0490

.17039

ROE

-4.90

.58

-.2480

1.66247

FR

.09

.29

.1950

.07153

Valid N (listwise)
Interpretation:
Table 4.2.1 represents descriptive statistics of Asmitha Microfinance Ltd
(AML) for the variables used in the estimates of the present study. The data are
collected from the Mix market database relating to Micro finance in India.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 83

Summary statistics in the above table include the minimum, maximum, mean
and the standard deviation for period 2004 2013. The minimum value of
-4.90 is found in ROE and ROE have the maximum value of 0.58. FR shows a
highest mean value of 0.1950. The ROE also shows the highest value of
standard deviation 1.66247.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 84

Table No. 4.2.2


Table showing Correlation Matrix of PM of Asmitha
Microfinance Ltd (AML)

Pearson Correlation
PM

ROA

ROE

FR

PM

ROA

ROE

FR

.996**

.976**

.590

.000

.000

.073

Sig. (2-tailed)
N

10

10

10

10

Pearson Correlation

.996**

.985**

.580

Sig. (2-tailed)

.000

.000

.079

10

10

10

10

Pearson Correlation

.976**

.985**

.478

Sig. (2-tailed)

.000

.000

10

10

10

10

Pearson Correlation

.590

.580

.478

Sig. (2-tailed)

.073

.079

.162

10

10

10

.162

10

**. Correlation is significant at the 0.01 level (2-tailed).


*. Correlation is significant at the 0.05 level (2-tailed).
Interpretation:
Table 4.2.2 presents the Pearson correlation coefficients for the variables
used in the study. Linear regressions were run in SPSS using the Enter Method
to test the set hypotheses or more clearly to test how the independent variables
explain the PM (Dependent Variable). Table 4.2.2 depicts that the highest
correlation coefficient value of variable is 0.996. ROA and ROE are showing
significant relationship with the dependent variable PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 85

Table No. 4.2.3


Table showing Regression Coefficient of PM of Asmitha
Microfinance Ltd (AML)

Model
1

R
.996

Model Summary
R Square Adjusted R Square Std. Error of the Estimate
.993
.989
.14817
a. Predictors: (Constant), FR, ROE, ROA

Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around
99.3% of the variation in the dependent variable / PM. The adjusted
explanation of the model is about 98.9%. The F value which is a measure of
overall significance of the estimated regression and also a test of significance of
R2 is 27.237.

Model
Regression
Residual
Total

ANOVA
Sum of Squares
d.f
Mean Square
18.325
3
6.108
.132
6
.022
18.456
9
a. Predictors: (Constant), FR, ROE, ROA
b. Dependent Variable: PM

F
27.237

Sig.
.000

Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on PM is significant. At 95% confidence level, the critical

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 86

value obtained from F table is 2.87.The calculated value is 27.237 which is


greater than the tabular value and falls in the rejection region. Therefore, we
can say that there is a significant relationship between dependent variable PM
and the determinants of PM of Asmitha Microfinance Ltd (AML).
Coefficients
Model

Unstandardized
Coefficients

Standardized
Coefficients

Sig.

-.084

.936

Std. Error

Beta

(Constant)

-.023

.274

ROA

9.789

2.395

1.165

4.087

.006

ROE

-.145

.228

-.168

-.635

.549

FR

-.114

1.129

-.006

-.101

.923

a. Dependent Variable: PM
Interpretation:
The table presents the estimated results. The regression was run with
PM as dependent and ROA, ROE and FR as independent variables. PM as
dependent variable there is significant relationship with ROA. ROE and FR is
having negative co-efficient which shows that these variable has an inverse
impact on the dependent variable PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 87

Table No. 4.2.4


Table showing Descriptive Statistics of PM of Bhartiya
Samruddhi Finance Ltd (BSFL)

Minimum

Maximum

Mean

Std. Deviation

PM

-5.84

.21

-.9740

1.98426

ROA

-.64

.03

-.1290

.24406

ROE

.00

276.97

27.9420

87.50057

FR

.11

.28

.2150

.05442

Valid N (listwise)
Interpretation:
Table 4.2.4 represents descriptive statistics of Bhartiya Samruddhi
Finance Ltd (BSFL) for the variables used in the estimates of the present study.
The data are collected from the Mix market database relating to Micro finance
in India. Summary statistics in the above table include the minimum,
maximum, mean and the standard deviation for period 2004 2013. The
minimum value of -5.84 is found in PM and ROE has the maximum value of
276.97 and shows a highest mean value of 27.9420. The ROE also shows the
highest value of standard deviation 87.50057.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 88

Table No. 4.2.5


Table showing Correlation Matrix of PM of Bhartiya Samruddhi
Finance Ltd (BSFL)

Pearson Correlation
PM

ROE

FR

ROA

ROE

FR

.976**

-.863**

.891**

.000

.001

.001

10

10

Sig. (2-tailed)
N

ROA

PM

10

Pearson Correlation

.976

Sig. (2-tailed)

.000

10

**

-.738

10

Pearson Correlation

-.863

-.738

Sig. (2-tailed)

.001

.015

10

10

**

.000

10

10

-.680*
.031

10

.891

.902

Sig. (2-tailed)

.001

.000

.031

10

10

10

**

.902**

.015

Pearson Correlation

**

10
*

-.680

10
*

1
10

*. Correlation is significant at the 0.05 level (2-tailed).


**. Correlation is significant at the 0.01 level (2-tailed).
Interpretation:
Table 4.2.5 presents the Pearson correlation coefficients for the variables
used in the study. Linear regressions were run in SPSS using the Enter Method
to test the set hypotheses or more clearly to test how the independent variables
explain the PM (Dependent Variable). Table depicts that the highest correlation
coefficient value of variable is 0.976. ROA, ROE and FR are showing significant
relationship with the dependent variable PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 89

Table No. 4.2.6


Table showing Regression Coefficient of PM of Bhartiya
Samruddhi Finance Ltd (BSFL)

Model
1

R
.999

Model Summary
R Square Adjusted R Square Std. Error of the Estimate
.998
.997
.11246
a. Predictors: (Constant), FR, ROE, ROA

Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around
99.8% of the variation in the dependent variable / PM. The adjusted
explanation of the model is about 99.7%. The F value which is a measure of
overall significance of the estimated regression and also a test of significance of
R2 is 31.975.

Model
Regression
1
Residual
Total

ANOVA
Sum of Squares
d.f
Mean Square
35.360
3
11.787
.076
6
.013
35.436
9
a. Predictors: (Constant), FR, ROE, ROA
b. Dependent Variable: PM

F
Sig.
31.975 .000

Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on PM is significant. At 95% confidence level, the critical
value obtained from F table is 2.87.The calculated value is 31.975 which is

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 90

greater than the tabular value and falls in the rejection region. Therefore, we
can say that there is a significant relationship between dependent variable PM
and the determinants of PM of Bhartiya Samruddhi Finance Ltd (BSFL).

Coefficients

Model

Unstandardized
Coefficients

Standardize
d
Coefficients

Sig.

-.760

.476

Std. Error

Beta

(Constant)

-.294

.387

ROA

5.807

.388

.714

14.973

.000

ROE

-.007

.001

-.313

-11.159

.000

FR

1.245

1.600

.034

.778

.466

a. Dependent Variable: PM
Interpretation:
The above table presents the estimated results. The regression was run
with PM as dependent and ROA, ROE and FR as independent variables. With
PM as dependent variable there is significant relationship with the ROA and
ROE. ROA and FR is having positive co-efficient which shows that these
variable has an inverse impact on the dependent variable PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 91

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 92

Table No. 4.2.7


Table showing Descriptive Statistics of PM of Bharatha
Swamukti Samsthe (BSS)
Minimum

Maximum

Mean

Std. Deviation

PM

.01

.36

.1810

.12706

ROA

.00

.12

.0460

.04169

ROE

.01

.83

.3170

.29128

FR

.20

.36

.2610

.05216

Valid N (listwise)

Interpretation:
Table 4.2.7 represents descriptive statistics of Bharatha Swamukti
Samsthe (BSS) for the variables used in the estimates of the present study. The
data are collected from the Mix market database relating to Micro finance in
India. Summary statistics in Table1 include the minimum, maximum, mean
and the standard deviation for period 2004 2013. The minimum value of .00
is found in ROA and ROE have the maximum value of .83. ROE shows a
highest mean value of .3170 and highest value of standard deviation .29128.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 93

Table No. 4.2.8


Table showing Correlation Matrix of PM of BSS

PM

ROA

ROE

FR

Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N

PM
1
10
.930**
.000
10
.912**
.000
10
.828**
.003
10

ROA
.930**
.000
10
1
10
.972**
.000
10
.886**
.001
10

ROE
.912**
.000
10
.972**
.000
10
1
10
.842**
.002
10

FR
.828**
.003
10
.886**
.001
10
.842**
.002
10
1
10

**. Correlation is significant at the 0.01 level (2-tailed).


*. Correlation is significant at the 0.05 level (2-tailed).

Interpretation:
Table 4.2.8 presents the Pearson correlation coefficients for the
variables used in the study. Linear regressions were run in SPSS using the
Enter Method to test the set hypotheses or more clearly to test how the
independent variables explain the PM (Dependent Variable). Table 4.2.8 depicts
that the highest correlation coefficient value of variable is 0.972. ROA, ROE &
FR are showing significant relationship with the dependent variable PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 94

Table No. 4.2.9


Table showing Regression Coefficient of PM of BSS
Model
1

R
.931

Model Summary
R Square Adjusted R Square Std. Error of the Estimate
.867
.800
.05684
a. Predictors: (Constant), FR, ROE, ROA

Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around
86.7% of the variation in the dependent variable / PM. The adjusted
explanation of the model is about 80%. The F value which is a measure of
overall significance of the estimated regression and also a test of significance of
R2 is 12.992.

Model
Regression
Residual
Total

ANOVA
Sum of Squares
d.f
Mean Square
.126
3
.042
.019
6
.003
.145
9
a. Predictors: (Constant), FR, ROE, ROA
b. Dependent Variable: PM

F
12.992

Sig.
.005

Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on PM is significant. At 95% confidence level, the critical
value obtained from F table is 2.87.The calculated value is 12.992 which is
greater than the tabular value and falls in the rejection region. Therefore, we

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 95

can say that there is a significant relationship between dependent variable PM


and other determinants of Bharatha Swamukti Samsthe (BSS).

Coefficients

Model

Standardize
d
Coefficients

Unstandardized
Coefficients

Sig.

.201

.847

Std. Error

(Constant)

.034

.169

ROA

2.288

2.269

.751

1.008

.352

ROE

.068

.279

.156

.244

.816

FR

.077

.795

.032

.097

.926

Beta

a. Dependent Variable: PM

Interpretation:
The above table presents the estimated results. The regression was run
with PM as dependent and ROA, ROE and FR as independent variables. With
PM

as

dependent

variable

there

is

significant

relationship

with

the

determinants of PM. ROA, ROE and FR is having positive co-efficient which


shows that these variable has an inverse impact on this dependent variable
PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 96

Table No. 4.2.10


Table showing Descriptive Statistics of PM of Cashpor Micro
Credit (CASHPOR MC)

Minimum

Maximum

Mean

Std. Deviation

PM

-.66

.17

-.0690

.30889

ROA

-.12

.04

-.0080

.06033

ROE

-5.05

17.91

2.3610

6.59299

FR

.18

.26

.2240

.02836

Valid N (listwise)

Interpretation:
Table 4.2.10 represents descriptive statistics of Cashpor Micro Credit
(CASHPOR MC) for the variables used in the estimates of the present study.
The data are collected from the Mix market database relating to Micro finance
in India. Summary statistics in the above table include the minimum,

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 97

maximum, mean and the standard deviation for period 2004 2013. The
minimum value of -0.66 is found in PM and ROE have the maximum value of
17.91. Also ROE shows a highest mean value of 2.3610 and the highest value
of standard deviation 6.59299.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 98

Table No. 4.2.11


Table showing Correlation Matrix of PM of Cashpor Micro
Credit (CASHPOR MC)

Pearson Correlation
PM

ROA

ROE

FR

.997**

-.455

.815**

.000

.187

.004

Sig. (2-tailed)

ROA

ROE

FR

PM

10

10

10

10

Pearson Correlation

.997**

-.449

.813**

Sig. (2-tailed)

.000

.193

.004

10

10

10

10

Pearson Correlation

-.455

-.449

-.396

Sig. (2-tailed)

.187

.193

10

10

.257
10

10

.813

-.396

Pearson Correlation

.815

Sig. (2-tailed)

.004

.004

.257

10

10

10

**

**

10

**. Correlation is significant at the 0.01 level (2-tailed).


*. Correlation is significant at the 0.05 level (2-tailed).
Interpretation:
Table 4.2.11 presents the Pearson correlation coefficients for the
variables used in the study. Linear regressions were run in SPSS using the
Enter Method to test the set hypotheses or more clearly to test how the
independent variables explain the PM (Dependent Variable). Table depicts that
the highest correlation coefficient value of variable is 0.997. ROA and FR are
showing significant relationship with the dependent variable GLPTA.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 99

Table No. 4.2.12


Table showing Regression Coefficient of PM of Cashpor Micro
Credit (CASHPOR MC)
Model Summary
Model
R
R Square Adjusted R Square
Std. Error of the Estimate
1
.997
.995
.992
.02717
a. Predictors: (Constant), FR, ROE, ROA
Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around
99.5% of the variation in the dependent variable / PM. The adjusted
explanation of the model is about 99.2%. The F value which is a measure of
overall significance of the estimated regression and also a test of significance of
R2 is 38.582.
ANOVA
Model
Regression
1
Residual
Total

Sum of Squares

d.f

Mean
Square
.285
.001

.854
3
38.582
.004
6
.859
9
a. Predictors: (Constant), FR, ROE, ROA
b. Dependent Variable: PM

Sig.
.000

Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on PM is significant. At 95% confidence level, the critical
value obtained from F table is 2.87.The calculated value is 38.582 which is
greater than the tabular value and falls in the rejection region. Therefore, we
Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 100

can say that there is a significant relationship between dependent variable PM


and the determinants of PM of Cashpor Micro credit (CASPHOR MC).

Coefficients

Model

Unstandardized
Coefficients

Standardize
d
Coefficients

Sig.

-.447

.670

Std. Error

Beta

(Constant)

-.056

.125

ROA

5.039

.265

.984

18.989

.000

ROE

.000

.002

-.008

-.254

.808

FR

.126

.549

.012

.230

.826

a. Dependent Variable: PM
Interpretation:
The above table presents the estimated results. The regression was run
with PM as dependent and ROA, ROE and FR as independent variables. ROA
shows that there is significant relationship with dependent variable PM. ROE is
having negative co-efficient which shows that these variable has an inverse
impact on the dependent variable PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 101

Table No. 4.2.13


Table showing Descriptive Statistics of PM of Swayam Krishi
Sangam (SKS)
Minimum

Maximum

Mean

Std. Deviation

PM

-2.94

.28

-.2409

.94919

ROA

-.47

.05

-.0400

.15356

ROE

-1.17

.27

-.0891

.45154

FR

.15

.27

.2200

.04171

Valid N (listwise)
Interpretation:
Table 4.2.7 represents descriptive statistics of Swayam Krishi Sangam
(SKS) for the variables used in the estimates of the present study. The data are
collected from the Mix market database relating to Micro finance in India.
Summary statistics in the above table include the minimum, maximum, mean
and the standard deviation for period 2004 2013. The minimum value of
-2.94 is found in PM and it has the maximum value of 0.28. FR shows a
highest mean value of .2200. The PM also shows the highest value of standard
deviation .94919.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 102

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 103

Table No. 4.2.14


Table showing Correlation Matrix of PM of Swayam Krishi
Sangam (SKS)

Pearson Correlation
PM

ROA

ROE

FR

PM

ROA

ROE

FR

.999**

.946**

.661*

.000

.000

.027

Sig. (2-tailed)
N

10

10

10

10

Pearson Correlation

.999**

.959**

.674*

Sig. (2-tailed)

.000

.000

.023

10

10

10

10

Pearson Correlation

.946**

.959**

.652*

Sig. (2-tailed)

.000

.000

10

10

10

10

Pearson Correlation

.661*

.674*

.652*

Sig. (2-tailed)

.027

.023

.030

10

10

10

.030

10

**. Correlation is significant at the 0.01 level (2-tailed).


*. Correlation is significant at the 0.05 level (2-tailed).
Interpretation:
Table 4.2.7 presents the Pearson correlation coefficients for the variables
used in the study. Linear regressions were run in SPSS using the Enter Method
to test the set hypotheses or more clearly to test how the independent variables
explain the PM (Dependent Variable). Table depicts that the highest correlation
coefficient value of variable is 0.999. ROA and ROE are showing significant
relationship with the dependent variable PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 104

Table No. 4.2.15


Table showing Regression Coefficient of PM of Swayam Krishi
Sangam (SKS)

Model
R
1
1.000

Model Summary
R Square Adjusted R Square Std. Error of the Estimate
.999
.999
.02697
a. Predictors: (Constant), FR, ROE, ROA

Interpretation:
Explanatory power of the model as indicated by R 2 (multiple coefficient of
determination) and Adjusted R2 is fairly good. The model explains around
99.9% of the variation in the dependent variable / PM. The adjusted
explanation of the model is about 99.9%. The F value which is a measure of
overall significance of the estimated regression and also a test of significance of
R2 is 4.126.

Model
Regression
1
Residual
Total

ANOVA
Sum of Squares
d.f
Mean Square
F
9.005
3
3.002
4.126
.005
7
.001
9.010
10
a. Predictors: (Constant), FR, ROE, ROA
b. Dependent Variable: PM

Sig.
.000

Interpretation:
The ANOVA table reveals that F value is significant at .05 levels during
the study period. This clearly indicates that the variation caused by
independent variables on PM is significant. At 95% confidence level, the critical

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 105

value obtained from F table is 2.87.The calculated value is 4.126 which is


greater than the tabular value and falls in the rejection region. Therefore, we
can say that there is a significant relationship between dependent variable PM
and the determinants of PM of Swayam Krishi Sangam (SKS).

Coefficients
Model

Unstandardized
Coefficients

Standardized
Coefficients

Sig.

2.022

.083

Std. Error

Beta

(Constant)

.128

.064

ROA

7.087

.201

1.147

35.289

.000

ROE

-.291

.067

-.138

-4.374

.003

FR

-.508

.277

-.022

-1.834

.109

a. Dependent Variable: PM
Interpretation:
The above table presents the estimated results. The regression was run
with PM as dependent and ROA, ROE and FR as independent variables. With
PM as dependent variable there is significant relationship with ROA and ROE.
ROA is having positive co-efficient which shows that these variable has an
inverse impact on the dependent variable PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 106

5. FINDINGS AND SUGGESTIONS


5.1 FINDINGS
5.1.1Findings of GLPTA:

1. GLPTA as dependent variable there is no significant relationship with the


determinants of GLPTA. PE and AE is found to have positive

co-

efficient which shows that these variable has an inverse impact on this
dependent variable GLPTA.
2. There is no significant relationship with the dependent variable GLPTA
and its determinants. DER, PAR and TE is having negative co-efficient
which shows that these variable has an inverse impact on this dependent
variable GLPTA.
3. With GLPTA as dependent variable there is no significant relationship
with the determinants of GLPTA. CAR, DER, OE, and AE is found to have
positive co-efficient which shows that these variable has an inverse
impact on this dependent variable GLPTA.
4. GLPTA has no significant relationship with the determinants of GLPTA.
DER, OE and PE is having positive co-efficient which shows that these
variable has an inverse impact on this dependent variable GLPTA.
5. There is no significant relationship with the dependent variable GLPTA
and its determinants. PE, AE, TE and FE is having positive co-efficient
which shows that these variables has an inverse impact on this
dependent variable GLPTA.

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Determinants of GLP and Profitability of selected MFIs | 107

5.1.2

Findings of PM:
1. PM as dependent variable there is significant relationship with ROA.ROE
and FR is having negative co-efficient which shows that these variable
has an inverse impact on the dependent variable PM.
2. ROA and ROE has a significant relationship with the dependent variable
PM. ROA and FR is having positive co-efficient which shows that these
variable has an inverse impact on the dependent variable PM.
3. With PM as dependent variable there is significant relationship with the
determinants of PM. ROA, ROE and FR is having positive co-efficient
which shows that these variable has an inverse impact on this dependent
variable PM.
4. ROA shows that there is significant relationship with dependent variable
PM. ROE is having negative co-efficient which shows that these variable
has an inverse impact on the dependent variable PM.
5. PM as dependent variable there is significant relationship with ROA and
ROE. ROA is having positive co-efficient which shows that these variable
has an inverse impact on the dependent variable PM.

5.2

SUGGESTIONS

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Determinants of GLP and Profitability of selected MFIs | 108

5.2.1

GLPTA

The AML Micro Finance Institutions has to improve and utilize the
Capital to Asset Ratio (CAR) which is negatively correlated with GLPTA.
This implies the over capitalization situation. Therefore, AML has to

efficiently utilize the capital.


The BSFL Micro Finance Institutions has to utilize the Personnel

resources to the fullest extent to enhance the business.


The BSS Micro Finance Institutions has to utilize the Personnel

Expenses (PE) and Financial Expenses (FE) to enhance the business.


The CASHPOR MC Micro Finance Institutions has to reduce the
Administrative Expenses (AE) and Financial Expenses (FE) to a

considerable extent to enhance the business effectively and efficiently.


The SKS Micro Finance Institutions has to utilize the Capital to Asset
Ratio (CAR) and also it has to utilize the Personnel Expenses (PE) to
enhance the business.

5.2.2 PM

The AML Micro Finance Institutions has to take adequate measures to


increase the Financial Revenue (FR) which is negatively correlated with

PM.
The BSFL and CASHPOR MC Micro Finance Institutions the Return on
Equity (ROE) has to make efficient utilization of reserves and surplus to

enhance the business.


The SKS Micro Finance Institutions has to diversify the income
generating activity of Financial Revenue (FR) which is negatively
correlated with PM.

Jagadeesh T - Department of Commerce - SKASC

Determinants of GLP and Profitability of selected MFIs | 109

6. CONCLUSION
The overall financial performance of selected 5 companies have been
analyzed. Efficiency and Profitability have been taken to assess financial
performance as they are considered as performance indicators of MFIs. It can
be concluded that, the variables Capital to asset Ratio (CAR), Debt Equity ratio
(DER), Administrative Expense (AE), OE (operating Expense), PE (Personnel
Expense), PAR (Personnel Allocation Ratio), TE (Total Expense) and are highly
correlated with GLPTA (Gross Loan Portfolio to Total Assets) thereby explaining
the level of efficiency of MFIs. Thus the fluctuations in these ratios would
impact on GLPTA. Since the explanatory variables are negatively correlated
with profit margin, profitability of MFIs are in a vulnerable conditions. The
MFIs have to improve their profitability by efficient utilization of manpower and
capital resources.

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Determinants of GLP and Profitability of selected MFIs | 110

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Jagadeesh T - Department of Commerce - SKASC

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