Premium
Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model
Author(s) -
CAUDILL STEVEN B.,
GROPPER DANIEL M.,
HARTARSKA VALENTINA
Publication year - 2009
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2009.00226.x
Subject(s) - microfinance , subsidy , business , estimation , key (lock) , cost efficiency , developing country , industrial organization , economics , economic growth , computer science , market economy , computer security , management , operating system
Microfinance institutions (MFIs) play a key role in many developing countries. Utilizing data from Eastern Europe and Central Asia, MFIs are found to generally operate with lower costs the longer they are in operation. Given the differences in operating environments, subsidies, and organizational form, this finding of increasing cost effectiveness may not aptly characterize all MFIs. Estimation of a mixture model reveals that roughly half of the MFIs are able to operate with reduced costs over time, while half do not. Among other things, we find that larger MFIs offering deposits and those receiving lower subsidies operate more cost effectively over time.