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The cost of ownership in microfinance organization

  • Mersland, Roy

This article analyses the cost of ownership in microfinance organizations. We specifically compare the ownership-cost of Shareholders Firms (SHFs), Non Profit Organizations (NPOs) and Cooperatives (COOPs). A paradoxical situation motivates us: Most providers of microfinance, both historically and today, are NPOs or COOPs, while several policy papers advocate SHFs. Based on an extension of Hansmann’s (1996) economic theory of ownership we propose that cost variables related to market contracting of microfinance services favor NPOs and COOPs, whereas most cost variables related to the practice of ownership favor SHFs. We conclude that in severe imperfect markets, where most microfinance organizations operate, NPOs and COOPs are still needed.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2061.

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Date of creation: 15 Jan 2007
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Handle: RePEc:pra:mprapa:2061
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