How To Measure The Subsidy Received By A Development Finance Institution
The most common indicator of the financial performance of development finance institutions, the Subsidy Dependence Index of Yaron (1992a), fails to recognize that subsidies are like equity injections whose use over time has a cost. Thus, the SDI underestimates subsidy. This paper gives a modified framework that counts all subsidies as equity injections. The paper also recasts the traditional SDI formula to clarify its definition and to show its invariance with respect to the form of subsidized resources. The modified framework is applied to the Grameen Bank in Bangladesh and to Caja los Andes, a microfinance organization in Bolivia. The underestimation of the traditional measure is material. The modified framework could be applied to any subsidized organization.
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- Hashemi, Syed M. & Schuler, Sidney Ruth & Riley, Ann P., 1996. "Rural credit programs and women's empowerment in Bangladesh," World Development, Elsevier, vol. 24(4), pages 635-653, April.
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- Gonzalez-Vega, Claudio & Schreiner, Mark & Meyer, Richard L. & Rodriguez-Meza, Jorge & Navajas, Sergio, 1996. "Bancosol: The Challenge Of Growth For Microfinance Organizations," Economics and Sociology Occasional Papers 28333, Ohio State University, Department of Agricultural, Environmental and Development Economics.
- Pitt, M.M. & Khandker, S.R., 1996. "Household and Intrahousehold Impact of the Grameen Bank and Similar Targeted Credit Programs in Bangladesh," World Bank - Discussion Papers 320, World Bank.
- J. D. Von Pischke & Dale W Adams, 1980. "Fungibility and the Design and Evaluation of Agricultural Credit Projects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(4), pages 719-726.
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