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The Cost Structure Of Microfinance Institutions In Eastern Europe And Central Asia

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  • Valentina Hartarska
  • Steven B. Caudill

    ()

  • Daniel M. Gropper

    ()

Abstract

Microfinance institutions are important, particularly in developing countries, because they expand the frontier of financial intermediation by providing loans to those traditionally excluded from formal financial markets. This paper presents the first systematic statistical examination of the performance of MFIs operating in Eastern Europe and Central Asia. A cost function is estimated for MFIs in the region from 1999-2004. First, the presence of subsidies is found to be associated with higher MFI costs. When output is measured as the number of loans made, we find that MFIs become more efficient over time and that MFIs involved in the provision of group loans and loans to women have lower costs. However, when output is measured as volume of loans rather than their number, this last finding is reversed. This may be due to the fact that such loans are smaller in size; thus for a given volume more loans must be made.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp809.

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Length: pages
Date of creation: 01 Jan 2006
Date of revision:
Handle: RePEc:wdi:papers:2006-809

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Keywords: Eastern Europe; banking; microfinance; efficiency;

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Cited by:
  1. 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.

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