EconPapers    
Economics at your fingertips  
 

Subsidies to microfinance institutions: how do they affect cost efficiency and mission drift?

Anastasia Cozarenco, Valentina Hartarska and Ariane Szafarz

Applied Economics, 2022, vol. 54, issue 44, 5099-5132

Abstract: The costs and benefits of subsidized microfinance are still controversial. We utilize a cost-function estimation approach that accounts for the double bottom line (social and financial) of microfinance institutions (MFIs) to evaluate how subsidies affect both cost efficiency and risk of mission drift. We control for endogenous self-selection into the business models of credit-only versus credit-plus-deposit. Our results suggest that MFIs that both supply loans and collect deposits need no subsidies to be cost-efficient. In addition, subsidies to these MFIs are associated with an increase in deposit size, which might hurt the most disadvantaged depositors. In sum, combining subsidized funds from donors with deposits increases the risk of mission drift, and can therefore be socially undesirable.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2022.2041176 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Subsidies to microfinance institutions: How do they affect cost efficiency and mission drift? (2022) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:54:y:2022:i:44:p:5099-5132

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2022.2041176

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2025-03-24
Handle: RePEc:taf:applec:v:54:y:2022:i:44:p:5099-5132