Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model

Caudill, Steven B.; Gropper, Daniel M.; Hartarska, Valentina

doi:10.1111/j.1538-4616.2009.00226.x

Cited by 152 publications

(148 citation statements)

References 38 publications

(41 reference statements)

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“…Moreover, cost functions are more appropriate than profit functions because MFIs are price takers on the input market, and have some monopoly on the output market for marginal clients (Varian 1984). Estimation methods include data envelopment analysis (Paxton 2007;Gutierres-Nieto et al 2007), stochastic frontier analysis (Hartarska and Mersland 2012;Hermes et al 2011), or mixture modeling (Caudill et al 2009). …”

Section: Summary Of the Relevant Literaturementioning

confidence: 99%

“…A structural approach, requiring cost (or profit) function estimation, is used by Caudill et al (2009) who study the evolution of MFIs in time, Hartarska and Mersland (2012) study the impact of governance mechanisms on managerial (in)efficiency, and Hermes et al (2011) study trade-offs between sustainability and outreach. Typically, cost functions rather than profit functions are estimated because MFIs minimize costs, and do not necessarily maximize profits.…”

Section: Summary Of the Relevant Literaturementioning

confidence: 99%

“…Therefore, we estimate a multiproduct cost function, which can directly account for zero-valued inputs, following those used in earlier bank efficiency studies-e.g., Berger and Humphrey (1991) and Mitchell and Onvural (1996). In particular, we focus on scope economies between microloans and microsavings, where these two outputs are measured in dollar volume but account for the cost of capital as in Caudill et al (2009).…”

Section: Introductionmentioning

confidence: 99%

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Should all microfinance institutions mobilize microsavings? Evidence from economies of scope

et al. 2014

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We extend a recently developed generalized local polynomial estimator into a semiparametric smooth coefficient framework to estimate a generalized cost function. The advantage of the generalized local polynomial approach is that we can simultaneously choose the degree of polynomial for each continuous nonparametric regressor and the bandwidths via data-driven methods. We provide estimates of scope economies from the joint production of microloans and microdeposits for a dataset of Microfinance Institutions from over 50 countries. Our approach allows analysis on all Microfinance Institutions rather than only those offering just microloans. Moreover, the smooth coefficient estimator provides a general interface in which to account for both direct and indirect environmental factors. We find substantial scope economies in general, of about 10 % at the median, as well as evidence that economies of scope

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Section: Summary Of the Relevant Literaturementioning

confidence: 99%

Section: Summary Of the Relevant Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Should all microfinance institutions mobilize microsavings? Evidence from economies of scope

et al. 2014

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“…The alternative, MIVs, concentrates primarily on types of loans to MFIs, and the choice of institutions benefiting from them is often unclear. 10 The World index (MSCI All Countries World Index) is quoted in USD and contains 9,000 stocks from both developed (24) and emerging (21) countries. The stock selection is based on liquidity (trade frequency and volume) and size (market value).…”

Section: Methodsmentioning

confidence: 99%

Investment in Microfinance Equity: Risk, Return, and Diversification Benefits

Briere,

Szafarz

2012

SSRN Journal

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This paper draws a global picture of worldwide microfinance equity. Taking full advantage of daily quoted prices of microfinance stocks from their issuance, we construct microfinance country equity indices and an international global microfinance index. We analyze changes in these indices, assessed in reference to comparable indices for the financial sector and also to national indices. Our findings show that microfinance has been closely correlated with the financial sector since 2003. In terms of risk exposure, estimates of the Capital Asset Pricing Model demonstrate that microfinance shares exhibit higher market beta than those of conventional financial institutions and have equivalent currency exposure.JEL Classifications: G11, G15, O16, C58, G21

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“…The reason is that distances are longer and population densities are lower, making it more time and fuel consuming for banks to approach and to monitor borrowers (Armendáriz de Aghion and Morduch, 2010;Caudill et al, 2009). Collection costs are considered to be one of the largest operational cost components in microfinance (Shankar, 2007).…”

Section: Lending Principles In Microfinancementioning

confidence: 99%

Microfinance Beyond the Standard? Evaluating Adequacy and Performance of Agricultural Microcredit

Weber¹

2013

Microfinance 3.0

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Microfinance was successful in increasing access to credit for micro, small and medium enterprises in developing countries, particularly in urban areas. The offer of installment loans as the standard credit product for new and very small customers has been indentified as one of the keys that enabled microfinance institutions to reach out to formerly unbanked entrepreneurs. However, these standard loans always were considered as inadequate for agricultural entrepreneurs with seasonal production cycles. For this reason, this paper investigates the effects of providing flexible agricultural microfinance loans (flex loans) to farmers as an alternative to standard installment loans. The study was carried out in cooperation with two banks of the AccessHolding Microfinance AG in Tanzania and Madagascar. A mixed-methods approach was applied relying on observations during field visits and in-depth portfolio analyses.Our results reveal that the combination of standard and flex loans enables the investigated microfinance institution to address a wide range of agricultural producers. Based on our results it seems very unlikely that seasonal agricultural producers would have had credit access without flex loans. Standard loans are only adequate to address non-seasonal agricultural producers. We also find that nonseasonal agricultural producers repay their loans with delinquency rates similar or even better than those of non-farmers. For seasonal agricultural producers a redis-* The views expressed in this paper are entirely those of the author and do not necessarily represent those of KfW. The authors are grateful to Access Microfinance Holding AG and LFS Financial Systems GmbH in Berlin, Germany, for the provision of data, in particular Stephan Hödtke and his colleagues from the LFS IT department. Furthermore, we would like to thank all colleagues from AccèsBanque Madagascar for their great support during the field visits in Madagascar and for contributing their expertise; Claudia Schmerler is also acknowledged for her helpful comments.

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Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model

Cited by 152 publications

References 38 publications

Should all microfinance institutions mobilize microsavings? Evidence from economies of scope

Should all microfinance institutions mobilize microsavings? Evidence from economies of scope

Investment in Microfinance Equity: Risk, Return, and Diversification Benefits

Microfinance Beyond the Standard? Evaluating Adequacy and Performance of Agricultural Microcredit

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