Financial Sustainability of Indian Microfinance Institutions (MFIs): An Empirical Assessment of Asset Value and Profitability Indicators

Abstract

This study delves into the financial sustainability of Microfinance Institutions (MFIs) in India by exploring how institutional size and capital composition impact core profitability metrics such as Return on Assets (ROA), Return on Equity (ROE), and Operational Self-Sufficiency (OSS). Drawing on a decade of sectoral data from Sa-Dhan reports, the analysis evaluates how variations in asset base and debt-equity ratio influence financial outcomes. Asset value serves as a proxy for institutional scale and efficiency, while the debt-equity ratio reflects financial leverage and risk exposure.

Through multiple regression analysis, the study uncovers directional patterns between structural indicators and profitability, despite the absence of strong individual statistical significance due to a limited dataset. The findings underscore that asset expansion generally correlates with improved financial performance, whereas excessive reliance on debt may undermine sustainability. These insights are relevant for institutional strategists, investors, and policymakers committed to strengthening the financial resilience of MFIs and enhancing the long-term goals of financial inclusion.