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Investigating the unobserved heterogeneity effect on microfinance social efficiency

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  • Fall, François Seck
  • Tchakoute Tchuigoua, Hubert
  • Vanhems, Anne
  • Simar, Léopold

    (Université catholique de Louvain, LIDAM/ISBA, Belgium)

Abstract

The main objective of this study is to assess the impact of unobserved heterogeneity on microfinance social efficiency analysis . Based on recent nonparametric techniques and directional distances, we identify a latent heterogeneity factor related to the microfinance institute (MFI) manager’s ability to promote women, independent of MFI size . We test for the significance of this unobserved factor and analyze the impact of MFI social inefficiency measures . Using a cross-country sample of 501 MFIs in 2011 from six main regions of the world, our findings reveal a significant effect of unobserved heterogeneity on the frontier and hence stress the importance of subjective factors in defining the set of production possibilities. We assess the robustness of our findings with the considered profit-oriented status and analyze the link between our unobserved heterogeneity factor and institutional and socioeconomic indicators.

Suggested Citation

  • Fall, François Seck & Tchakoute Tchuigoua, Hubert & Vanhems, Anne & Simar, Léopold, 2022. "Investigating the unobserved heterogeneity effect on microfinance social efficiency," LIDAM Discussion Papers ISBA 2022010, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvad:2022010
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    Keywords

    OR in Developing Countries ; Microfinance ; Gender ; Social Efficiency ; Unobserved Heterogeneity ; Nonparametric Robust Frontier Models;
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