The social and financial efficiency of microfinance institutions: the case of Bosnia and Herzegovina

Efendic Velid () and Hadziahmetovic Nejra ()
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Efendic Velid: School of Economics and Business, University of Sarajevo, Bosnia and Herzegovina
Hadziahmetovic Nejra: Team assistant at World Bank Office in Sarajevo

South East European Journal of Economics and Business, 2017, vol. 12, issue 2, 85-101

Abstract: This paper investigates the financial and social efficiency of microfinance institutions (“MFIs”) in Bosnia and Herzegovina, as well as the effects of the latest crisis on these “two-dimensional” efficiencies. Specifically, we analyze the efficiency of MFIs in Bosnia and Herzegovina (BiH) as a good case of a European, post-war country in transition with a developed micro-financial sector. The efficiency analysis relies on secondary data collected and investigated through Data Envelopment Analysis (DEA). The study covers data for the period commencing in 2008 and ending in 2015. In our empirical investigation, we find a suboptimal level of both financial and social efficiency among MFIs in BiH. However, financial efficiency is significantly higher than social efficiency, while small-sized MFIs over perform larger ones in both the financial and social dimensions. As a result of the crisis, MFIs recorded a declining trend in efficiency up to 2010, after which they began to show signs of slow recovery. However, our results suggest that MFIs prioritized financial over social goals in recovery period following the crisis.

Keywords: Efficiency; Microfinance institutions; Bosnia and Herzegovina (search for similar items in EconPapers)
JEL-codes: C14 G29 L31 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:seejeb:v:12:y:2017:i:2:p:85-101:n:6

DOI: 10.1515/jeb-2017-0018

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South East European Journal of Economics and Business is currently edited by Adnan Efendic, Vesna Babić-Hodović and Aziz Šunje

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