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Microfinance Institutions (MFIs) play a crucial role in financial inclusion and social empowerment, with funding sources significantly influencing their overall performance. Despite existing research efforts on the relationship between capital structure and the performance of MFIs, a notable gap remains in the literature, particularly concerning Indian MFIs. This study aims to address this void by examining the influence of capital structure on the financial and social performance of Indian MFIs. The study aims to assess the effect of capital structure on financial and social performance through a systematic literature review of 20 articles using Scopus and Google Scholar. Network analysis and systematic literature review methodologies, employing tools such as Bibliometrix and VOSviewer, were used to scrutinize the selected records. Findings reveal inconclusive outcomes on the effect of capital structure on MFIs' performance, specifically in the heterogeneous context of India, highlighting that while Indian MFIs utilize debt financing to expand services, it may elevate credit risk and non-performing assets, negatively impacting overall performance. The empirical results can guide MFIs in optimizing their capital structures for financial self-sufficiency, enabling better services for underserved populations. The study underscores the need for more empirical analyses, incorporating additional variables and a broader range of MFIs, to enhance reliability and provide actionable recommendations for financing structures and diversified funding sources.
Dhiman et al. (Fri,) studied this question.