Assessing Financial Sustainability of Microfinance Institutions Through Systems Dynamics

Abstract

The Indian financial system is strong and provides global financial services. Banks, NBFCs, and other financial institutions have supplied a significant amount of India's financial services. However, MFIs are crucial in getting financial services to underserved areas and getting to the core of the economy. In order for these MFIs to be financially viable in addition to provide financial services to underserved parts in rural and urban areas, they must be more resilient and well-connected. Using systems dynamics modelling, this study aims to examine the sustainability of MFIs by determining the elements that affect their financial sustainability. To do this, a model of a stock flow diagram and causal loop diagram has been created using simulation. The findings indicate a positive correlation between MFIs' sustainability and their financial success.