Financial Sustainability and Outreach of Microfinance Institutions in India: An Empirical Study (2022–2023)

Abstract

Microfinance Institutions (MFIs) play a pivotal role in promoting financial inclusion in India, delivering essential financial services to populations traditionally excluded from formal banking. Balancing the dual goals of financial sustainability and social outreach is a core challenge for these institutions. This study empirically examines the relationship between financial sustainability and outreach among Indian MFIs during 2022–2023, analyzing key indicators such as Portfolio at Risk (PAR), Capital Adequacy Ratio (CAR), Operational Self-Sufficiency (OSS), Return on Equity (ROE), number of loan accounts and geographical spread. Data from prominent MFIs including Spandana Sphoorty, Ujjivan Small Finance Bank, Janalakshmi Financial Services, Satin Creditcare Network and Arohan Financial Services reveals that improvements in financial health often coincide with enhanced outreach, highlighting the interdependence of operational efficiency and expansion. The study provides insights for policymakers and practitioners to design strategies that strengthen the sector’s sustainability while fulfilling its social mission.