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Outreach and Efficiency of Microfinance Institutions

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Author Info

  • Hermes, Niels
  • Lensink, Robert
  • Meesters, Aljar

Abstract

Summary This paper uses stochastic frontier analysis to examine whether there is a trade-off between outreach to the poor and efficiency of microfinance institutions (MFIs). We find convincing evidence that outreach is negatively related to efficiency of MFIs. More specifically, we find that MFIs that have a lower average loan balance (a measure of the depth of outreach) are also less efficient. Moreover, we find evidence showing that MFIs that have more women borrowers as clients (again a measure of the depth of outreach) are less efficient. These results remain robustly significant after having added a number of control variables.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 39 (2011)
Issue (Month): 6 (June)
Pages: 938-948

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Handle: RePEc:eee:wdevel:v:39:y:2011:i:6:p:938-948

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Web page: http://www.elsevier.com/locate/worlddev

Related research

Keywords: microfinance outreach sustainability;

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References

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  1. Valentina Hartarska & Denis Nadolnyak, 2007. "Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence," Applied Economics, Taylor & Francis Journals, vol. 39(10), pages 1207-1222.
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  7. Conning, Jonathan, 1999. "Outreach, sustainability and leverage in monitored and peer-monitored lending," Journal of Development Economics, Elsevier, vol. 60(1), pages 51-77, October.
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  12. Robert Lensink & Aljar Meesters & Ilko Naaborg, 2008. "Bank efficiency and foreign ownership: do good institutions matter?," ULB Institutional Repository 2013/14283, ULB -- Universite Libre de Bruxelles.
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Citations

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Cited by:
  1. Ashfaq Ahmad Khan & Wiqar Ahmad, 2013. "Matching resources with demand: a flawed strategy?," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 20(1), pages 63-89, June.
  2. Sandrine Kaplan, 2013. "Microfinance efficiency in the West African economic and monetary union: have reforms promoted sustainability or outreach?," Working Papers 2013-025, Department of Research, Ipag Business School.
  3. Servin, Roselia & Lensink, Robert & van den Berg, Marrit, 2012. "Ownership and technical efficiency of microfinance institutions: Empirical evidence from Latin America," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 2136-2144.
  4. Kent, Derin & Dacin, M. Tina, 2013. "Bankers at the gate: Microfinance and the high cost of borrowed logics," Journal of Business Venturing, Elsevier, vol. 28(6), pages 759-773.
  5. Hartarska, Valentina & Shen, Xuan & Mersland, Roy, 2013. "Scale economies and input price elasticities in microfinance institutions," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 118-131.
  6. Carlos Serrano-Cinca & Begoña Gutiérrez-Nieto, 2012. "Microfinance, the long tail and mission drift," Working Papers CEB 12-001, ULB -- Universite Libre de Bruxelles.
  7. Hermes, Niels & Lensink, Robert, 2011. "Microfinance: Its Impact, Outreach, and Sustainability," World Development, Elsevier, vol. 39(6), pages 875-881, June.
  8. JJ. Cao-Alvira & LG. Deidda, 2013. "Financial liberalization and the development of microcredit," Working Paper CRENoS 201324, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  9. Louis, Philippe & Seret, Alex & Baesens, Bart, 2013. "Financial Efficiency and Social Impact of Microfinance Institutions Using Self-Organizing Maps," World Development, Elsevier, vol. 46(C), pages 197-210.
  10. KABLAN, Sandrine, 2012. "Microfinance efficiency in the West African Economic and Monetary Union: have reforms promoted sustainability or outreach?," MPRA Paper 39955, University Library of Munich, Germany.
  11. repec:ipg:wpaper:25 is not listed on IDEAS
  12. Koen Rossel-Cambier, 2010. "Do Multiple Financial Services Enhance the Poverty Outreach of Microfinance Institutions?," Working Papers CEB 10-058, ULB -- Universite Libre de Bruxelles.
  13. Piot-Lepetit, Isabelle & Nzongang, Joseph, 2014. "Financial sustainability and poverty outreach within a network of village banks in Cameroon: A multi-DEA approach," European Journal of Operational Research, Elsevier, vol. 234(1), pages 319-330.

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