Efficiency and Productivity of Microfinance: Incorporating the Role of Subsidies
The social nature of MFIs is mainly financed by subsidies from donors. Therefore, the role of subsidies cannot be under estimated in MFIs efficiency and productivity analysis. This paper is a first attempt to measure the financial efficiency and productivity of Microfinance Institutions (MFIs) worldwide taking into account the subsidies received by MFIs by using the non-parametric Data Envelopment Analysis (DEA). Towards this aim, a three-stage analysis is carried out. Firstly, technical and pure efficiency scores are calculated by splitting subsidies into input and output and entered into the DEA framework specifications depending on whether they are generating benifits (negative subsidies) or cost (positive subsidies) to the society. Secondly DEA-based Malmquist indices are calculated to analyze the intertemporal productivity change. Thirdly, Tobit Regression analysis are carried out to test a series of hypotheses concerning the relationship between financial efficiency and other indicators related to MFIs productivity, organization, outreach, sustainability and social impact. Overall subsidies contribute to financial efficiency of MFIs albeit marginally. Results uphold the tradeoff between outreach to the poor and financial efficiency. Thus MFIs which cater to the poor tend to bemore inefficient than those with clients relatively well off. Also evident is the fact that lending to women is efficient only in the presence of subsidies. MFIs in South Asia and Middle East & North Africa tend to be less efficient than the others.
|Date of creation:||2010|
|Date of revision:|
|Publication status:||Published by:|
|Contact details of provider:|| Postal: CP114/03, 42 avenue F.D. Roosevelt, 1050 Bruxelles|
Phone: +32 (0)2 650.48.64
Fax: +32 (0)2 650.41.88
Web page: http://difusion.ulb.ac.be
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Congo, Youssoufou, 2002. "Performance of Microfinance Institutions in Burkina Faso," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Lawrence M. Seiford & Joe Zhu, 1999. "Profitability and Marketability of the Top 55 U.S. Commercial Banks," Management Science, INFORMS, vol. 45(9), pages 1270-1288, September.
- Sherman, H. David & Gold, Franklin, 1985. "Bank branch operating efficiency : Evaluation with Data Envelopment Analysis," Journal of Banking & Finance, Elsevier, vol. 9(2), pages 297-315, June.
- Marek Hudon & Daniel Traca, 2006.
"On the efficiency effects of subsidies in microfinance: an empirical inquiry,"
Working Papers CEB
06-020.RS, ULB -- Universite Libre de Bruxelles.
- Hudon, Marek & Traca, Daniel, 2011. "On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry," World Development, Elsevier, vol. 39(6), pages 966-973, June.
- Daniel Traca, 2011. "On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry," ULB Institutional Repository 2013/89989, ULB -- Universite Libre de Bruxelles.
- Morduch, Jonathan, 1999. "The role of subsidies in microfinance: evidence from the Grameen Bank," Journal of Development Economics, Elsevier, vol. 60(1), pages 229-248, October.
- Kalyan Chakraborty & Basudeb Biswas & W. Cris Lewis, 2001. "Measurement of Technical Efficiency in Public Education: A Stochastic and Nonstochastic Production Function Approach," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 889-905, April.
- Luo, Xueming, 2003. "Evaluating the profitability and marketability efficiency of large banks: An application of data envelopment analysis," Journal of Business Research, Elsevier, vol. 56(8), pages 627-635, August.
When requesting a correction, please mention this item's handle: RePEc:sol:wpaper:10-009. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)
If references are entirely missing, you can add them using this form.