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Microfinance efficiency in the West African economic and monetary union: have reforms promoted sustainability or outreach?

Listed author(s):
  • Sandrine Kablan

This study aims to assess the microfinance institutions’ (MFIs’) efficiency in the West African Economic and Monetary Union (WAEMU) after the reforms that were undertaken in the industry. Given the complementary role between MFIs and banks (where MFIs reach the population that the banks cannot), we ask whether these reforms have promoted sustainability or outreach. For this purpose, we use a data envelopment analysis (DEA) to measure the social efficiency on the one hand and the financial efficiency on the other hand. Our results show that sustainability prevails. Indeed, we observe an increase in financial efficiency at the expense of social and financial efficiency. MFIs that stress outreach tend to be less efficient, when one considers their intermediation role. Moreover, reforms have a negative impact on social efficiency and a positive impact on financial efficiency. Indeed, prudential ratios and accounting standards that were implemented, led MFIs to privilege their intermediation role.

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Paper provided by Department of Research, Ipag Business School in its series Working Papers with number 2013-25.

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Length: pages
Date of creation: 01 Jan 2013
Handle: RePEc:ipg:wpaper:2013-25
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  1. Gutiérrez-Nieto, Begoña & Serrano-Cinca, Carlos & Mar Molinero, Cecilio, 2007. "Microfinance institutions and efficiency," Omega, Elsevier, vol. 35(2), pages 131-142, April.
  2. John Weiss & Heather Montgomery, 2005. "Great Expectations: Microfinance and Poverty Reduction in Asia and Latin America," Oxford Development Studies, Taylor & Francis Journals, vol. 33(3-4), pages 391-416.
  3. Jean Paul Azam & Bruno Biais & Magueye Dia, 2004. "Privatisation versus Regulation in Developing Economies: The Case of West African Banks," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 13(3), pages 361-394, September.
  4. Cull, Robert & Demirgüç-Kunt, Asli & Morduch, Jonathan, 2011. "Does Regulatory Supervision Curtail Microfinance Profitability and Outreach?," World Development, Elsevier, vol. 39(6), pages 949-965, June.
  5. Ben Bassem, 2008. "Efficiency of Microfinance Institutions in the Mediterranean: An Application of DEA," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 15(2), pages 343-354, September.
  6. Valentina Hartarska & Denis Nadolnyak, 2007. "Do regulated microfinance institutions achieve better sustainability and outreach? Cross-country evidence," Applied Economics, Taylor & Francis Journals, vol. 39(10), pages 1207-1222.
  7. Mersland, Roy & Strøm, R. Øystein, 2010. "Microfinance Mission Drift?," World Development, Elsevier, vol. 38(1), pages 28-36, January.
  8. Roberts, Peter W., 2013. "The Profit Orientation of Microfinance Institutions and Effective Interest Rates," World Development, Elsevier, vol. 41(C), pages 120-131.
  9. Hermes, Niels & Lensink, Robert & Meesters, Aljar, 2011. "Outreach and Efficiency of Microfinance Institutions," World Development, Elsevier, vol. 39(6), pages 938-948, June.
  10. Andrew Worthington, 1998. "The determinants of non-bank financial institution efficiency: a stochastic cost frontier approach," Applied Financial Economics, Taylor & Francis Journals, vol. 8(3), pages 279-287.
  11. Robert Cull & Asli Demirgüç-Kunt & Jonathan Morduch, 2009. "Microfinance Meets the Market," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 167-192, Winter.
  12. Mamiza Haq & Michael Skully & Shams Pathan, 2010. "Efficiency of Microfinance Institutions: A Data Envelopment Analysis," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 17(1), pages 63-97, March.
  13. Berg, Sigbjorn Atle & Forsund, Finn R. & Hjalmarsson, Lennart & Suominen, Matti, 1993. "Banking efficiency in the Nordic countries," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 371-388, April.
  14. Sandrine Kablan, 2009. "African Economic and Monetary Union (WAEMU)," Research Papers RP_192, African Economic Research Consortium.
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