This paper adds to this debate by analyzing whether financial and social efficiency are mutually exclusive in a context of implicit subsidies by the state and international donors. Introduction to microfinance institutions mfis part i. The author wishes to acknowledge the great support and contribution of her colleagues in building the womens world banking marketing for microfinance. On the one hand, social efficiency is related to the effectiveness and final objectives of the institution. Social efficiency in microfinance institutions core. Microfinance institutions and efficiency sciencedirect. If an mfi is not financially efficient it will not survive long, but we soon realised that studying financial efficiency is not enough. Social efficiency in microfinance institutions wiley online library. Microfinance institutions mfis play a crucial role in the financial world and they have a double financial and social role and.
Microfinance institutions and efficiency abstract microfinance institutions mfis are special financial institutions. A major debate in microfinance focuses on the existence of a tradeoff between the financial sustainability of microfinance institutions mfis and their outreach to poor clients. Efficiency targets portfolio served by microfinance institutions could have been larger by 2526% if microfinances were operating closer to efficiency frontier. Microfinance has been developed as alternative solution for global poverty alleviation effort in the last 30 years. Microfinance institutions could play an important role in meeting the financial needs of households and microentreprises. On the other hand, economic efficiency is necessary, but instrumental, to ensure the sustainability of the initiative. Can riskbased pricing improve social and financial.
Above and beyond the microcredit facet, microfinance could. Research article efficiency of african microfinance institutions page 2 of 8 in a recent study, louis et al. Microfinance institutions mfis are special financial institutions. Microfinance institution mfi has unique characteristic wherein they face double bottom line objectives of outreach to the poor and financial sustainability. Pdf social efficiency in microfinance institutions researchgate. We find two factors that improve their relative efficiency. Social and financial efficiency of islamic microfinance institutions. The examples in this publication come directly from microfinance institutions or banks providing microfinance services. This paper uses proprietary data on 1,335 microfinance institutions between 2005 and 2009, jointly serving 80. South east european journal of economics and business 12 2. Among other things, this increased focus on financial sustainability and efficiency is due to a number of developments the microfinance business has been recently confronted with, such as the increasing competition among mfis, the commercialization of microfinance i. The main contribution of this paper is to engage mfis to achieve the desired social efficiency without giving. On the one hand, skeptics question the impact of access to financial services on income, wealth and wellbeing. Social and financial efficiency of microfinance institutions in.
Research on mfi performance is still in its infancy. Hudon and traca 2008 state in their paper that mfis should do a tradeoff between financial and social efficiency, preferably financial efficiency, so they can better perform their social work. The social and financial efficiency of microfinance. This article analyses the determinants for social and economic efficiency in microfinance institutions using a seemingly unrelated regression. The researchers used selforganising map methodology to study 650 mfis, and the results showed a positive relationship between mfi heterogeneity and social efficiency. Favorable costbenefit ratios then depend on low costs. Microfinance, mfis, data envelopment analysis, social efficiency, sri lanka. This paper investigates the financial and social efficiency of microfinance institutions mfis in bosnia and. Dea and sfa research on the efficiency of microfinance institutions. Pdf social efficiency in microfinance institutions. If the inline pdf is not rendering correctly, you can download the pdf file here. They have both a social nature and a forprofit nature. For the analysis of financial efficiency, we rely on existing literature for traditional financial institutions.
In 1997, berger and humphrey surveyed studies that estimated the efficiency of financial institutions in 21 countries. Business model and operational efficiency of microfinance in bosnia and herzegovina. A dea approach to microfinance institutions efficiency cermi. Accepted 4th may, 2018 abstract microfinance institutions mfis are distinct financial institutes as theyfocus on constructinga social. Microfinance institutions mfis play a crucial role in the financial. The impact of the lower rate is offset by increased efficiency from general economies of scale as well as.
Pdf that show microfinance as an effective poverty reduction tool. Efficiency of microfinance institutions in pakistan. This is a pdf file of an unedited manuscript that has been accepted for publication. A data envelopment analysis application, socioeconomic planning sciences, vol. In the recent past, microfinance has been strongly recommended as an intervention that could assist poor people to improve their quality of life by providing small amounts of money to initiate development enterprises. This paper adds to this debate by analyzing whether financial and social efficiency are mutually exclusive in a context of implicit subsidies by the state and. A major debate in microfinance focuses on the existence of a trade.
Efficiency of microfinance institutions in pakistan ather azim khan, faisal mustafa, ambreen khursheed and faiza siddiqui faculty of management studies, university of central punjab, pakistan. Their performance has been traditionally measured by means of financial ratios. When applying the ratio to the indicators provided in the microfinance barometer 123 million consumers overall, it is fair to conclude, the number of mfi consumers can be. Performance studies in microfinance are therefore less straightforward compared to performance studies in traditional banking research. Provided that social investors unlike their counterparts in traditional, commercial markets, do not require higher financial returns and are instead motivated by mere philanthropic drive, however, it is the institutionsprograms that exhibit their effectiveness and efficiency in achieving their mission and demonstrate little drift that attract. Definitions of selected financial terms, ratios and adjustments for microfinance, 3rd edition. Social efficiency in microfinance institutions article pdf available in journal of the operational research society 601. On the one hand, the financial efficiency measures the financial revenues compared to the costs disbursed to. This paper aims to gauge financial and social efficiency of pakistani mfis across the country to know the underlying. Important theories and models of microfinance economics essay. A study of efficiency of microfinance institutions in. Social efficiency in microfinance institutions b guti. Microfinance banks perhaps are not appropriate financial institutions to extend microcredit to poorer community member and to achieve the goal of women.
Interest in the area of microfinance since 2000 has been increased may be due to. Performance and social indicators for microfinance institutions 7 the methodology. The doublebottom line of mfis is considered through the assessment of two distinct efficiency indices. The social efficiency of microfinance institutions. However, there is still general agreement that microfinance helps improve the lives of the clients it serves. The objective of the study has been to estimate the efficiency of microfinance institutions in pakistan. Second, we estimate efficiency of mfis based on a large panel data from india which is the largest microfinance market in the world. Social and financial efficiency of microfinance institutions. Efficiency, microfinance institutions, bosnia and herzegovina.
They have a double financial and social role and need to be. The financial and social performance of mfis directly affects their interest rate planning. Measuring results of microfinance instituions performanceportfolio quality, financial sustainability, and efficiencythat occupy most of the discussion in this guide. However, virtually all noncommercial funders of microfinance see finan. The paper goes beyond simple financial ratios using a data envelopment analysis dea approach to measure the efficiency of mfis. The social and financial efficiency of microfinance institutions. It is, therefore, appropriate to assess their performance by means, not only of financial ratios, but also by means of social indicators. This study proposes a twostage analysis to measure islamic microfinance institutions imfis performance by comparing.
Productivity change of microfinance institutions in bosnia. This article analyzes the determinants for social and economic efficiency in microfinance. The performance of microfinance institutions mfis is examined in this paper. Request pdf social and financial efficiency of microfinance institutions the performance of microfinance institutions mfis is examined in this paper. This paper investigates the financial and social efficiency of microfinance. Pdf the social efficiency of microfinance institutions in sri lanka.
This article analyses the determinants for social and economic efficiency in microfinance institutions using a seemingly unrelated. Pdf microfinance institutions mfis are a special case in the financial world. They have a double financial and social role and need to be efficient at both. This book contains new mfi performance research by top. An application of data envelopment analysis to mfis in peru. In this paper, we try to measure the efficiency of mfis in relation to financial and social outputs using data envelopment analysis. Abstractmicrofinance institutions mfis are a special case in the financial world. Are financial and social efficiency mutually exclusive. Social efficiency in microfinance institutions springerlink. Institutions using a seemingly unrelated regression. Research investigates further how optimization of credit decisioning results on mfi efficiency and subsequently on financial inclusion. A data envelopment analysis application, socioeconomic planning sciences 2015, doi. Do african microfinance institutions need efficiency. The first presents a brief description of microfinance in terms of objectives.
The new microfinance handbook fills a critical gap in the current literature on financial inclusion. The microfinance industry is now seen not only as a tool to improve living conditions and. The microfinance services are provided through microfinance institutions. Mfis are hybrid organizations with dual objectives. This article analyzes the determinants for social and economic efficiency in microfinance institutions using a seemingly unrelated regression.
The goal of this chapter is to analyze the effect of the recent global financial crisis on the efficiency of microfinance institutions mfis. Social and financial efficiency of islamic microfinance. Application of data envelopment analysis shows, on an average financial efficiency of indian mfis is much higher than their social efficiency. In certain cases, raw data has been altered to preserve confidentiality.
580 554 256 186 879 696 243 789 334 401 292 925 114 1029 1377 521 621 1212 935 290 314 194 515 519 432 1420 467 561 1423 448 885 140 835 1306