Women’s participation and cost efficiency in microfinance institutions: a Sub-Saharan study

Tarekegn Tariku Ebissa, Arega Seyoum Asfaw and Deresse Mersha Lakew

Cogent Business & Management, 2024, vol. 11, issue 1, 2304307

Abstract: This study aims to examine the factors influencing the cost efficiency of microfinance institutions in Sub-Saharan African countries. A ten-year unbalanced panel data consisting of 128 microfinance institutions from 34 countries was used for the analysis. The study included all microfinance institutions in Sub-Saharan Africa that reported to the Microfinance Information Exchange database and had financial reports for at least five consecutive fiscal years between 2009 and 2018. The cost efficiency of the institutions was investigated using a stochastic frontier approach. The findings indicate that microfinance institutions operating in Sub-Saharan African countries are operating beyond the cost frontier line, with only 13% demonstrating efficiency. Key determinants of cost efficiency in microfinance institutions in SSA include the size of the institution, cost per borrower, women’s participation, institutional type, and country income category. Notably, increased women’s participation as board members, loan officers, and borrowers significantly improves cost efficiency. Microfinance institutions are encouraged to transform their custom practices in line with the rapid changes in the technology and techniques of modern financial service provisions and ensure the involvement of women in board members, supervisory positions and borrowing services. We also recommend that institutions appoint women selectively on nominated work positions.The primary aim of the study is to investigate the association between women participation and cost efficiency of microfinance institutions. The study examines the participation of women in microfinance institutions from five engagement perspectives, namely board member, management member, loan officer, regular staff and borrowing services. As expected, women’s participation on the board, as loan officer and borrower improve the cost efficiency of microfinance institutions in SSA. The findings indicate that allowing women to be engaged in these three positions can significantly enhance the cost efficiency of the microfinance institutions. It is advisable to employ women selectively in designated work positions within microfinance institutions.

Date: 2024
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DOI: 10.1080/23311975.2024.2304307

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