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Impact of Regulation on the Cost Efficiency of Microfinance Institutions in Bangladesh

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  • Baqui Khalily
  • Abdul Khaleque
  • Syed Badruddoza

Abstract

Bangladesh lagged in microfinance regulation until 2006 when it established Microcredit Regulatory Authority (MRA). So far, MRA has granted license to around 650 Microfinance Institutions (MFIs); and has been supervising them with prudential and non-prudential regulations. We assessed the impact of regulation on cost efficiency using from pre-regulation and post-regulation data of 182 MFIs. Panel data analyses robustly show that regulation improves cost efficiency; directly through changing behavior of the MFIs, and indirectly through increasing staff productivity and portfolio size. We found partners of PKSF—the wholesale lending agency in Bangladesh—and unsubsidized MFIs are more efficient than others.

Suggested Citation

  • Baqui Khalily & Abdul Khaleque & Syed Badruddoza, 2014. "Impact of Regulation on the Cost Efficiency of Microfinance Institutions in Bangladesh," Working Papers 22, Institute of Microfinance (InM).
    • Handle: RePEc:imb:wpaper:22
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    File URL: http://inm.org.bd/publication/workingpaper/workingpaper22.pdf
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    Cited by:

    1. Khalily, M. A. Baqui, 2016. "Financial Inclusion, Financial Regulation, and Education in Bangladesh," ADBI Working Papers 621, Asian Development Bank Institute.
    2. Giovanna Aguilar & Jhonatan Portilla, 2023. "The nonlinearity of the relationship between competition and the dual performance of regulated microfinance institutions in Peru," SN Business & Economics, Springer, vol. 3(7), pages 1-27, July.
    3. D’Espallier, Bert & Goedecke, Jann & Hudon, Marek & Mersland, Roy, 2017. "From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?," World Development, Elsevier, vol. 89(C), pages 19-33.

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