Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model |
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| Authors: | STEVEN B. CAUDILL,DANIEL M. GROPPER&dagger ,VALENTINA HARTARSKA&Dagger |
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| Affiliation: | Steven B. Caudill;is the McCallum Professor of Economics and Business at Rhodes College, and also at DEIR, University of Sassari (E-mail: ). Daniel M. Gropper;is the David and Meredith Luck Professor of Economics at the College of Business, Auburn University (E-mail: ). Valentina Hartarska;is an Associate Professor in the Department of Agricultural Economics and Rural Sociology, Auburn University (E-mail: ). |
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| Abstract: | 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. |
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| Keywords: | G210 O160 |
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