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Efficiency Analysis of Microfinance Institutions in Bangladesh: Does Regulation Matter?

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  • Farhana Ferdousi

    (Southeast University, Bangladesh.)

Abstract

The aim of this study is to measure efficiency of various Microfinance Institutions (MFIs) in Bangladesh before and after introducing Microcredit Regulatory Authority (MRA) in order to capture the immediate impact of regulation. Data Envelopment Analysis (DEA) and Malmquist Productivity index technique have been used for this study. Findings reveal that 35% firms’ average productivity increase sharply after enacting microfinance regulation. Seven firms have been graduated from the inefficiency level to efficiency level. However, most of the firms among the increased efficiency list are comparatively young in terms of starting their microfinance operations. Result of Tobit regression does not find any significant relationship between efficiency and regulation. Due to regulation, only number of outreach increases but to ensure more productive growth, MRA needs to be more proactive in strengthening policy environment and educating MFIs to be better equipped with sound financial and managerial tools and techniques.

Suggested Citation

  • Farhana Ferdousi, 2020. "Efficiency Analysis of Microfinance Institutions in Bangladesh: Does Regulation Matter?," European Journal of Business and Management Research, European Open Science, vol. 5(2), March.
    • Handle: RePEc:epw:ejbmr0:v:5:y:2020:i:2:id:50287
    DOI: 10.24018/ejbmr.2020.5.2.287
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