Efficiency Wage and Productivity in the Indian Microfinance Industry: A Panel Evidence

Title

Efficiency Wage and Productivity in the Indian Microfinance Industry: A Panel Evidence

Creator

Mia M.A.; Pellegrina L.D.; Zhang C.; Sangwan S.

Description

Enhanced productivity remains a crucial agenda for firms to attain cost and competitive advantages in the market. Hence, the main purpose of this study is to investigate the effects of efficiency wage (EW) on the productivity of microfinance institutions (MFIs) with respect to their dual objectives, namely, outreach (depth and breadth) and financial sustainability. Unbalanced panel data of 179 Indian MFIs were collected over the period 20102018 from the Microfinance Information Exchange (MIX) market platform (now obtainable from the World Bank catalogue). Under a static model setting (fixed effects model), the observed relationship between EW and MFIs productivity is mixed. On the one hand, EW exhibits a strong and statistically significant positive relationship with the breadth of outreach, even after considering various control variables and alternative proxies of EW. On the other hand, EW shows no positive influence on the MFIs depth of outreach; rather, it results in a mission drift of MFIs, with the poorest of the poor being neglected (weak and insignificant for proxy of EW). Concerning the financial sustainability of MFIs, EW exhibits a positive and statistically significant effect, except for the profitability dimension when an alternative proxy of EW is used. A two-step system generalized method of moments (GMM) performed to limit endogeneity problems also validates most of our findings. The outcomes of this study could help MFIs managers in designing appropriate financial packages to enhance MFIs productivity and subsequently attain the dual objective of outreach and sustainability. 2022 SAGE Publications.

Source

IIM Kozhikode Society and Management Review, Vol-11, No. 2, pp. 235-252.

Date

2022-01-01

Publisher

Sage Publications India Pvt. Ltd

Subject

Efficiency wage; financial sustainability; India; microfinance; microfinance institutions; mission drift; outreach

Coverage

Mia M.A., School of Management, Universiti Sains Malaysia, Penang, Malaysia; Pellegrina L.D., Department of Economics, Management and Statistics (DEMS), University of Milano-Bicocca, Piazza Ateneo Nuovo, Milan, Italy; Zhang C., School of Accounting, Nanjing University of Finance and Economics, Nanjing, China; Sangwan S., Department of Commerce, Christ University, Maharashtra, Pune, India

Rights

Restricted Access

Relation

ISSN: 22779752

Format

Online

Language

English

Type

Article

Identifier

https://doi.org/10.1177/22779752211061203

https://www.scopus.com/inward/record.uri?eid=2-s2.0-85142279142&doi=10.1177%2f22779752211061203&partnerID=40&md5=e3e1d09b13b30a93f87fce40850de1ce