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Investigating the unobserved heterogeneity effect on microfinance social efficiency

François Seck Fall, Hubert Tchakoute Tchuigoua, Anne Vanhems and Leopold Simar

No 2022010, LIDAM Discussion Papers ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: The main objective of this study is to assess the impact of unobserved heterogeneity on microfinance social efficiency analysis . Based on recent nonparametric techniques and directional distances, we identify a latent heterogeneity factor related to the microfinance institute (MFI) manager’s ability to promote women, independent of MFI size . We test for the significance of this unobserved factor and analyze the impact of MFI social inefficiency measures . Using a cross-country sample of 501 MFIs in 2011 from six main regions of the world, our findings reveal a significant effect of unobserved heterogeneity on the frontier and hence stress the importance of subjective factors in defining the set of production possibilities. We assess the robustness of our findings with the considered profit-oriented status and analyze the link between our unobserved heterogeneity factor and institutional and socioeconomic indicators.

Keywords: OR in Developing Countries; Microfinance; Gender; Social Efficiency; Unobserved Heterogeneity; Nonparametric Robust Frontier Models (search for similar items in EconPapers)
Pages: 28
Date: 2022-03-11
New Economics Papers: this item is included in nep-eff and nep-mfd
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