On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry

Daniel Traca

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: The impact of subsidies on the efficiency of microfinance institutions (MFIs) is a key question in the field, given the large volume of subsidies received over the last twenty years. Using an original database of rating agencies, this paper gives empirical evidence on the impact of subsidy intensity on the efficiency of MFIs. After correcting for endogeneity bias, our results suggest that subsidies have contributed to raise efficiency, for the majority of MFIs in our sample. However, the evidence suggests also that there is a level beyond which increased subsidization taxes efficiency, at the margin. In our sample, 50% of MFIs receive levels of subsidization higher than that threshold.

Keywords: microfinance (search for similar items in EconPapers)
Date: 2011-06-01
New Economics Papers: this item is included in nep-eff and nep-mfd
Note: SCOPUS: ar.j
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Citations: View citations in EconPapers (82)

Published in: World development (2011) v.39 n° 6,p.966-973

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Related works:
Journal Article: On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry (2011)
Working Paper: On the efficiency effects of subsidies in microfinance: an empirical inquiry (2006)
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