Outreach and efficiency of microfinance institutions

C.L.M. Hermes, B.W. Lensink, A.J. Meesters

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312 Citations (Scopus)

Abstract

This paper uses stochastic frontier analysis to examine whether there is a trade-off between outreach to the poor and efficiency of microfinance institutions (MFIs). We find convincing evidence that outreach is negatively related to efficiency of MFIs. More specifically, we find that MFIs that have a lower average loan balance (a measure of the depth of outreach) are also less efficient. Moreover, we find evidence showing that MFIs that have more women borrowers as clients (again a measure of the depth of outreach) are less efficient. These results remain robustly significant after having added a number of control variables. (C) 2011 Elsevier Ltd. All rights reserved.

Original languageEnglish
Pages (from-to)938-948
Number of pages11
JournalWorld Development
Volume39
Issue number6
DOIs
Publication statusPublished - Jun-2011

Keywords

  • microfinance
  • outreach
  • sustainability
  • TECHNICAL EFFICIENCY
  • BANK EFFICIENCY
  • COST EFFICIENCY
  • SUSTAINABILITY

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