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The social and financial efficiency of microfinance institutions: the case of Bosnia and Herzegovina

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  • Efendic Velid

    (School of Economics and Business, University of Sarajevo, Bosnia and Herzegovina)

  • Hadziahmetovic Nejra

    (Team assistant at World Bank Office in Sarajevo)

Abstract

This paper investigates the financial and social efficiency of microfinance institutions (“MFIs”) in Bosnia and Herzegovina, as well as the effects of the latest crisis on these “two-dimensional” efficiencies. Specifically, we analyze the efficiency of MFIs in Bosnia and Herzegovina (BiH) as a good case of a European, post-war country in transition with a developed micro-financial sector. The efficiency analysis relies on secondary data collected and investigated through Data Envelopment Analysis (DEA). The study covers data for the period commencing in 2008 and ending in 2015. In our empirical investigation, we find a suboptimal level of both financial and social efficiency among MFIs in BiH. However, financial efficiency is significantly higher than social efficiency, while small-sized MFIs over perform larger ones in both the financial and social dimensions. As a result of the crisis, MFIs recorded a declining trend in efficiency up to 2010, after which they began to show signs of slow recovery. However, our results suggest that MFIs prioritized financial over social goals in recovery period following the crisis.

Suggested Citation

  • Efendic Velid & Hadziahmetovic Nejra, 2017. "The social and financial efficiency of microfinance institutions: the case of Bosnia and Herzegovina," South East European Journal of Economics and Business, Sciendo, vol. 12(2), pages 85-101, December.
    • Handle: RePEc:vrs:seejeb:v:12:y:2017:i:2:p:85-101:n:6
    DOI: 10.1515/jeb-2017-0018
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    More about this item

    Keywords

    Efficiency; Microfinance institutions; Bosnia and Herzegovina;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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