THE COST STRUCTURE OF MICROFINANCE INSTITUTIONS IN EASTERN EUROPE AND CENTRAL ASIA

Valentina Hartarska, Steven B Caudill and Daniel Gropper

No wp809, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Microfinance institutions are important, particularly in developing countries, because they expand the frontier of financial intermediation by providing loans to those traditionally excluded from formal financial markets. This paper presents the first systematic statistical examination of the performance of MFIs operating in Eastern Europe and Central Asia. A cost function is estimated for MFIs in the region from 1999-2004. First, the presence of subsidies is found to be associated with higher MFI costs. When output is measured as the number of loans made, we find that MFIs become more efficient over time and that MFIs involved in the provision of group loans and loans to women have lower costs. However, when output is measured as volume of loans rather than their number, this last finding is reversed. This may be due to the fact that such loans are smaller in size; thus for a given volume more loans must be made.

Keywords: Eastern Europe; banking; microfinance; efficiency (search for similar items in EconPapers)
JEL-codes: G20 G21 O16 (search for similar items in EconPapers)
Pages: pages
Date: 2006-01-01
New Economics Papers: this item is included in nep-dev, nep-fin, nep-fmk, nep-mfd and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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