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Microfinance institution costs: effects of gender, subsidies and technology

Author

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  • Steven B. Caudill
  • Daniel M. Gropper
  • Valentina Hartarska

Abstract

Purpose - The purpose of this paper is to present a statistical examination of the factors affecting the performance of microfinance institutions (MFIs) operating in Eastern Europe and Central Asia. Design/methodology/approach - Data on MFIs operating in Eastern Europe and Central Asia during the period 1999‐2004 were used in this study. A statistical analysis of the performance of these MFIs was conducted utilizing a cost function approach, which was estimated using seemingly unrelated regressions. Findings - During the study time period, MFIs involved in the provision of group loans and with a higher percentage of loans to women had lower costs. The presence of subsidies is also found to be associated with higher MFI costs. Social implications - Providing financial services to women, and use of group loans was associated with lower costs in Eastern Europe and central Asian microfinance institutions in the early 2000s. Originality/value - This study focuses exclusively on efficiency of MFIs operating in Eastern Europe and Central Asia, and the first to explicitly measure outreach efficiency when output is measured by number of active clients, rather than the value of the overall MFI lending portfolio.

Suggested Citation

  • Steven B. Caudill & Daniel M. Gropper & Valentina Hartarska, 2012. "Microfinance institution costs: effects of gender, subsidies and technology," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 4(4), pages 292-304, November.
    • Handle: RePEc:eme:jfeppp:v:4:y:2012:i:4:p:292-304
    DOI: 10.1108/17576381211279271
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    Citations

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    Cited by:

    1. Valentina Hartarska & Denis Nadolnyak & Roy Mersland, 2014. "Are Women Better Bankers to the Poor? Evidence from Rural Microfinance Institutions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1291-1306.
    2. Knar Khachatryan & Vardan Baghdasaryan & Valentina Hartarska, 2018. "Is the model loans-plus-savings better for microfinance in ECA? A PSM comparison," Working Paper c5a69366-4231-479c-879d-c, European Microfinance Network.
    3. Ganna Sheremenko & Cesar L Escalante & Wojciech J Florkowski, 2017. "Financial Sustainability and Poverty Outreach: The Case of Microfinance Institutions in Eastern Europe and Central Asia," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(1), pages 230-245, January.
    4. Muneer Babu M., 2016. "Macroeconomic Determinants of Technological Change in Indian Microfinance Institutions," Global Business Review, International Management Institute, vol. 17(5), pages 1179-1195, October.
    5. Anastasia Cozarenco & Valentina Hartarska & Ariane Szafarz, 2019. "Too Many Cooks Spoil the Broth: The Conflicting Impacts of Subsidies and Deposits on the Cost-Efficiency of Microfinance Institutions," Working Papers CEB 19-001, ULB -- Universite Libre de Bruxelles.
    6. Moh’d Al-Azzam & Christopher Parmeter, 2021. "Competition and microcredit interest rates: international evidence," Empirical Economics, Springer, vol. 60(2), pages 829-868, February.
    7. Bailey, Rachel & Hartarska, Valentina, 2017. "Women's Property Rights and Outreach of Microfinance Institutions Targeting Women," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 253159, Southern Agricultural Economics Association.

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