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How To Measure The Subsidy Received By A Development Finance Institution

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  • Schreiner, Mark

Abstract

The most common indicator of the financial performance of development finance institutions, the Subsidy Dependence Index of Yaron (1992a), fails to recognize that subsidies are like equity injections whose use over time has a cost. Thus, the SDI underestimates subsidy. This paper gives a modified framework that counts all subsidies as equity injections. The paper also recasts the traditional SDI formula to clarify its definition and to show its invariance with respect to the form of subsidized resources. The modified framework is applied to the Grameen Bank in Bangladesh and to Caja los Andes, a microfinance organization in Bolivia. The underestimation of the traditional measure is material. The modified framework could be applied to any subsidized organization.

Suggested Citation

  • Schreiner, Mark, 1997. "How To Measure The Subsidy Received By A Development Finance Institution," Economics and Sociology Occasional Papers - ESO Series 28323, Ohio State University, Department of Agricultural, Environmental and Development Economics.
    • Handle: RePEc:ags:ohsesp:28323
    DOI: 10.22004/ag.econ.28323
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    References listed on IDEAS

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    1. Khandker, S.R. & Khalily, B. & Khan, Z., 1995. "Grameen Bank: Performance and Sustainability," World Bank - Discussion Papers 306, World Bank.
    2. Gonzalez-Vega, Claudio & Schreiner, Mark & Meyer, Richard L. & Rodriguez-Meza, Jorge & Navajas, Sergio, 1996. "Bancosol: The Challenge Of Growth For Microfinance Organizations," Economics and Sociology Occasional Papers - ESO Series 28333, Ohio State University, Department of Agricultural, Environmental and Development Economics.
    3. J. D. Von Pischke & Dale W Adams, 1980. "Fungibility and the Design and Evaluation of Agricultural Credit Projects," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(4), pages 719-726.
    4. Pitt, M.M. & Khandker, S.R., 1996. "Household and Intrahousehold Impact of the Grameen Bank and Similar Targeted Credit Programs in Bangladesh," World Bank - Discussion Papers 320, World Bank.
    5. Claudio Gonzalez-Vega & Mark Schreiner, 2001. "Dominican Republic: Analysis of the Clients of FondoMicro," Development and Comp Systems 0109008, University Library of Munich, Germany.
    6. Hashemi, Syed M. & Schuler, Sidney Ruth & Riley, Ann P., 1996. "Rural credit programs and women's empowerment in Bangladesh," World Development, Elsevier, vol. 24(4), pages 635-653, April.
    7. Hossain, Mahabub, 1988. "Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh," Research reports 65, International Food Policy Research Institute (IFPRI).
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    Cited by:

    1. Aminullah Assagaf & Hapzi Ali, 2017. "Determinants of Financial Performance of State-owned Enterprises with Government Subsidy as Moderator," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 330-342.

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