Scale economies and input price elasticities in microfinance institutions

Valentina Hartarska (), Xuan Shen and Roy Mersland

Journal of Banking & Finance, 2013, vol. 37, issue 1, 118-131

Abstract: We evaluate the efficiency of microfinance institutions (MFIs) using a structural approach which also captures these institutions’ outreach and sustainability objectives. We estimate economies of scale and input price elasticities for lending-only and deposit-mobilizing MFIs using a large sample of high-quality panel data. The results confirm conjectures that improvements in efficiency can come from the growth or consolidations of MFIs, as we find substantial increasing returns to scale for all but profitability-focused deposit-mobilizing MFIs. Our results support the existence of a trade-off between outreach and sustainability. All inputs are inelastic substitutes, but we find differences in own-price elasticities in lending-only and deposit-mobilizing MFIs.

Keywords: Microfinance; Efficiency; Input price elasticity; Scale economies; Microfinance institutions (search for similar items in EconPapers)
JEL-codes: F30 G21 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:1:p:118-131

DOI: 10.1016/j.jbankfin.2012.08.004

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