Distinguishing efficiency from heterogeneity in microfinance institutions: the role of gender and competition

Votsoma Djekna () and Thomas Blavet ()
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Votsoma Djekna: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - ULCO - Université du Littoral Côte d'Opale - Université de Lille - CNRS - Centre National de la Recherche Scientifique, CRESEM - Centre de Recherche sur les Sociétés et Environnements en Méditerranées - UPVD - Université de Perpignan Via Domitia
Thomas Blavet: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, LIRAES (URP_ 4470) - Laboratoire Interdisciplinaire de Recherche Appliquée en Economie de la Santé - UPCité - Université Paris Cité

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Abstract: This study aims to re-examine the impact of specialization in lending to women and the degree of competition on the inefficiency of microfinance institutions (MFIs), in order to reconcile divergent empirical results within the West African Economic and Monetary Union and Economic and Monetary Community of Central Africa. One possible explanation for these contradictions is the distinction between unobserved heterogeneity and MFIs' efficiency level which has not previously been accounted for. To test this idea, we apply the method developed by Wang and Ho (2010), which distinguishes heterogeneity from inefficiency. Specifically, we use the stochastic frontier approach to estimate a translog cost function for a sample of 122 MFIs operating in 12 countries over the period 2003–18. We decompose operational expenses into administrative, personnel, and depreciation expenses to estimate loan production technology. The results highlight that MFIs that specialize less in lending to women have higher cost efficiency and that competition is associated with decreased cost efficiency.

Keywords: microfinance; stochastic frontier; inefficiency; specialization; competition (search for similar items in EconPapers)
Date: 2026-05-06
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Published in Applied Economics, 2026, pp.1-14. ⟨10.1080/00036846.2026.2669353⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05614254

DOI: 10.1080/00036846.2026.2669353

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