International Journal of Mathematical, Engineering and Management Sciences

ISSN: 2455-7749

Financial Performance Analysis of NBFC-MFIs in India using TOPSIS and IV-TOPSIS

Priyanka Roy
Department of Management Studies, National Institute of Technology Silchar, Assam, India.

Binoti Patro
Department of Management Studies, National Institute of Technology Silchar, Assam, India.

DOI https://doi.org/10.33889/IJMEMS.2021.6.5.086

Received on May 29, 2021
  ;
Accepted on September 22, 2021

Abstract

The policymakers around the globe have been emphasizing on financial inclusion in line with sustainable development goals 2030 of the United Nations. Developing countries are still behind in ensuring greater financial inclusion especially for women. While banks are the apex financial institutions in any country, microfinance institutions proved to be promising in advancing financial inclusion because of its better reach to women in remote areas. Thus in a country like India, the outreach and sustainability of microfinance institutions is of utmost importance. This paper aims to rank the performance of microfinance institutions listed by Reserve Bank of India on the basis of their outreach, sustainability, quality and efficiency. The ranking is done separately for five years (2014-15 to 2018-19) using Technique for Order of Preference (TOPSIS) method while overall ranking and benchmarking for five years has been done using interval valued TOPSIS (IV-TOPSIS) method. The robustness of the study has been checked through sensitivity analysis. The overall results portray Satin Creditcare Network Limited as the best performing NBFC-MFI while BWDA Finance Limited as the worst performer for the combined period of 5 years

Keywords- Benchmarking, Financial performance, Microfinance, TOPSIS, Sensitivity analysis

Citation

Roy, P., & Patro, B. (2021). Financial Performance Analysis of NBFC-MFIs in India using TOPSIS and IV-TOPSIS. International Journal of Mathematical, Engineering and Management Sciences, 6(5), 1423-1438. https://doi.org/10.33889/IJMEMS.2021.6.5.086.

Conflict of Interest

The authors confirm that there is no conflict of interest to declare for this publication.

Acknowledgements

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. The authors would like to thank the editor and anonymous reviewers for their comments that help improve the quality of this work

References

Abrar, A., Hasan, I., & Kabir, R. (2021). Finance-growth nexus and banking efficiency: The impact of microfinance institutions. Journal of Economics and Business, 114, 105975.

Ambarkhane, D., Singh, A.S., & Venkataramani, B. (2018). Measuring total factor productivity change of microfinance institutions in India using malmquist productivity index. Indian Growth and Development Review, 12(1), 105-130.

Amile, M., Sedaghat, M., & Poorhossein, M. (2013). Performance evaluation of banks using fuzzy AHP and TOPSIS, case study: state-owned banks, partially private and private banks in Iran. Caspian Journal of Applied Sciences Research, 2(3), 128-138.

Awaworyi Churchill, S. (2020). Microfinance financial sustainability and outreach: is there a trade-off? Empirical Economics, 59(3), 1329-1350.

Bardhan, A.K., Nag, B., Mishra, C.S., & Tarei, P.K. (2021). An integrated framework for analysing performance indicators of Indian microfinance institutions: a multi-stakeholder perspective. Benchmarking: An International Journal. https://doi.org/10.1108/BIJ-09-2020-0470

Bartual Sanfeliu, C., Cervelló Royo, R., & Moya Clemente, I. (2013). Measuring performance of social and non-profit microfinance institutions (MFIs): An application of multicriterion methodology. Mathematical and Computer Modelling, 57(7-8), 1671-1678.

Bedecarrats, F., Angora, R.W., & Lapenu, C. (2009). Is social performance profitable? The relationship between social and financial performance in microfinance. MicroBanking Bulletin, 19(1), 22-29.

Cervelló-Royo, R., Guijarro, F., & Martinez-Gomez, V. (2019). Social performance considered within the global performance of microfinance institutions: A new approach. Operational Research, 19(3), 737-755.

Chattopadhyay, M., & Mitra, S.K. (2017). Applicability and effectiveness of classifications models for achieving the twin objectives of growth and outreach of microfinance institutions. Computational and Mathematical Organization Theory, 23(4), 451-474.

De Crombrugghe A, Tenikue, M., & Sureda, J. (2008). Performance analysis for a sample of microfinance institutions in India. Annals of Public and Cooperative Economics, 79(2), 269-299.

Cull, R., Harten, S., Nishida, I., Rusu, A.B., & Bull, G. (2015). Benchmarking the financial performance, growth, and outreach of greenfield MFIs in Africa. Emerging Markets Review, 25, 92-124.

Demirgüç-Kunt, A., Klapper, L.F., & Singer, D. (2013). Financial inclusion and legal discrimination against women: Evidence from developing countries. World Bank Policy Research Working Paper, 6416, 1-47. http://dx.doi.org/10.1596/1813-9450-6416

Diakoulaki, D., Mavrotas, G., & Papayannakis, L. (1995). Determining objective weights in multiple criteria problems : The critic method. Computers & Operations Research, 22(7), 763-770.

Dutta, P., & Das, D. (2014). Indian MFI at crossroads: Sustainability perspective. Corporate Governance (Bingley), 14(5), 728-748.

Ferro-Luzzi, G., & Weber, S. (2006). Measuring the performance of microfinance institutions. Haute École De Gestion De Genève, 1-17. https://doi.org/10.2139/ssrn.918750

Ghose, B., Paliar, S.J., & Mena, L. (2018). Does legal status affect performance of microfinance institutions?: Empirical evidence from India. Vision- The Journal of Business Perspective, 22(3), 316-328.

Ghouse, S.M. (2019). Micro finance - A catalyst in accelerating the growth of indian rural economy. International Journal of Recent Technology and Engineering, 8(3), 6010-6012.

Gümrah, A. (2016). Measuring the performance of participation banks by topsis method: Turkey and Malaysia cases. International Journal of Business and Management Studies, 5(1), 211-218.

Gupta, S., Mathew, M., Gupta, S., & Dawar, V. (2020). Benchmarking the private sector banks in India using MCDM approach. Journal of Public Affairs, 21(2), 1-6.

Hermes, N., & Hudon, M. (2018). Determinants of the performance of microfinance institutions: A systematic review. Journal of Economic Surveys, 32(5), 1483-1513.

Hermes, N., & Lensink, R. (2007). The empirics of microfinance: What do we know? The Economic Journal, 117(517), 1-10.

Ho, C.T., & Wu, Y.S. (2006). Benchmarking performance indicators for banks. Benchmarking: An International Journal, 13(1-2), 147-159.

Jahanshahloo, G.R., Hosseinzadeh Lotfi, F., & Davoodi, A.R. (2009). Extension of TOPSIS for decision-making problems with interval data: Interval efficiency. Mathematical and Computer Modelling, 49(5-6), 1137-1142.

Hwang, C.L., & Yoon, K. (1981). Multiple attribute decision- making methods & applications. Taylor & Francis Group, New York.

Lacalle-Calderón, M., Chasco, C., Alfonso-Gil, J., & Neira, I. (2015). A comparative analysis of the effect of aid and microfinance on growth. Canadian Journal of Development Studies, 36(1), 72-88.

Louis, P., Seret, A., & Baesens, B. (2013). Financial efficiency and social impact of microfinance institutions using self-organizing maps. World Development, 46, 197-210.

Mathew, M., & Thomas, J. (2019). Interval valued multi criteria decision making methods for the selection of flexible manufacturing system. International Journal of Data and Network Science, 3(4), 349-358.

Mushtaq, R., & Bruneau, C. (2019). Microfinance, financial inclusion and ICT: implications for poverty and inequality. Technology in Society, 59, 101154.

Mustafa, A.K.A., & Saat, M.M. (2013). Microfinance institutions performance measurement: Introducing a new performance measurement framework. Middle East Journal of Scientific Research, 15(11), 1618-1628.

Nadiya, M., Olivares-Polanco, F. & Ramanan, T.R. (2012). Dangers in mismanaging the factors affecting the operational self-sustainability (OSS) of Indian microfinance institutions (MFIs): an exploration into Indian microfinance crisis. Asian Economic and Financial Review, 2(3), 448-462.

Navajas, S., Schreiner, M., Meyer, R.L., Gonzalez-Vega, C., & Rodriguez-Meza, J. (2000). Microcredit and the poorest of the poor: Theory and evidence from Bolivia. World Development, 28(2), 333-346.

Ngong, C.A., Thaddeus, K.J., & Onwumere, J.U.J. (2021). Microfinancial inclusion nexus poverty alleviation: the case of Nigeria. Journal of Economic and Administrative Sciences. https://doi.org/10.1108/jeas-08-2020-0147

Pal Narwal, K., Pathneja, S., & Kumar Yadav, M. (2015). Performance analysis of banks and microfinance institutions in India. International Journal of Management and Business Research, 5(1), 9-18.

Quayes, S., & Joseph, G. (2017). Legal systems and performance of microfinance institutions. International Review of Applied Economics, 31(3), 304-317.

Rosenberg, R. (2009). Measuring results of microfinance institutions. Consultative Group to Assist the Poor, June. 1-25.

Roszkowska, E. (2011). Multi-criteria decision making models by applying the TOPSIS method to crisp and interval data. Multiple Criteria Decision Making/University of Economics in Katowice, 6(1), 200-230.

Saad, M., Taib, H.M., & Bhuiyan, A.B. (2019). Re-evaluating sustainability of microfinance institutions by using topsis. Humanities and Social Sciences Reviews, 7(2), 581-589.

Saunders, M., Mann, R., & Smith, R. (2007). Benchmarking strategy deployment practices. Benchmarking: An International Journal, 14(5), 609-623.

Shafi, M., & Reddy, M.R. (2017). Financial performance of microfinance institutions in India: A study based on outreach and profitability. International Journal of Applied Business and Economic Research, 15(9), 221-231.

Shih, H.S., Shyur, H.J., & Lee, E.S. (2007). An extension of TOPSIS for group decision making. Mathematical and Computer Modelling, 45(7), 801-813.

Sinha, R.P., & Pandey, P. (2019). Efficiency of microfinance institutions in India: A two-stage DEA approach. International Journal of Rural Management, 15(1), 49-77.

Yaron, J. (1994). What makes rural finance institutions successful? The World Bank Research Observer, 9(1), 49-70.

Privacy Policy| Terms & Conditions