Side-by-Side: A Slice of Microfinance Operations in India 2006

This is the fifth in a series of reports by Sa-Dhan, India on the performance and progress of Indian Community Development Financial Institutions (CDFIs). In this edition, 129 CDFIs contributed data to this report as against 86in the last edition.

The report uses an analytical framework based on client outreach, gross loan portfolio and age of institutions to compare financial performance of CDFIs. Findings include:

• CDFIs are maturing, with Operational Self Sufficiency (OSS) increasing to above 100%;
• Larger gross loan portfolio signifies enhanced financial efficiency;
• Greater outreach is consonant with better quality of assets;
• Operating costs across CDFIs have stabilized;
• Current repayment rates in high growth CDFIs is under stress indicating that growth needs tighter management;
• CDFIs need to focus on OSS as the key driver to plan and operate;
• Many operationally sustainable models are emerging within the sector;
• Large CDFIs provide important lessons on asset management and operational efficiency;
• Mutually aided cooperative societies are emerging as an example of operational sustainability;
• CDFIs would need to expand through systemic investments and long term planning that would involve operational as well as client service issues.