Open AccessSocial and Financial Efficiency of Microfinance Institutions in Pakistan
Author(s) -
Zahoor Khan,
Jamalludin Sulaiman
Publication year - 2015
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v54i4i-iipp.389-403
Subject(s) - microfinance , inefficiency , profitability index , economics , socioeconomic status , financial system , operational efficiency , financial market efficiency , economic efficiency , business , finance , economic growth , financial ratio , market economy , sociology , population , management , demography
Financial efficiency and profitability of „for profit‟institutions have been traditionally measured with the help of financialratios [Hassan and Sanchez (2009)]. However, financial ratios areinappropriate to investigate the sources of inefficiency, estimatefinancial or social efficiency with multiple inputs and outputs, and todecompose the sources of efficiency or inefficiency into technical,technological and scale efficiencies or inefficiencies respectively[Hassan and Sanchez (2009)]. Microfinance Institutions (MFIs) arespecial institutions, which simultaneously consider their social role touplift the marginalised community members along with their commercialobjective to secure self-sustainability. In standard literature thisphenomenon is coined MFIs as being „double bottom line” institutions.[Gutierrez-Nieto, Serrano-Cinca, and Mar Molinero (2007);Gutiérrez-Nieto, Serrano-Cinca, and Molinero (2007)]. This simultaneitydifferentiates MFIs from conventional financial institutions. Theachievement of socioeconomic efficiency is indispensable for MFIs tooperate independently and on a wider scale. Thus investigation ofsocioeconomic efficiency of MFIs is important for monitoring and optimalpolicy implications.