Productivity and Efficiency Analysis of Microfinance Institutions (MFIS) in Bangladesh

Subir Bairagi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper estimates productivity and efficiency of ten major microfinance institutions (MFIs) in Bangladesh using the stochastic frontier output distance function approach. Cobb-Douglas specification is applied with two outputs and four inputs for the period 2003-2011. Analysis reveals that on an average the rate of total factor productivity (TFP) growth in MFIs was 2.6%, mostly due to technological progress (2.5%), while the average efficiency change was only 0.1%. The mean efficiency of microfinance firms was 0.765, which implies that MFIs could have produced 23.5% more with the current levels of input bundles if they had been fully efficient. The determinants of firms’ inefficiencies are cost per borrower and operational self-sufficiency, significant at the 1% level. The smaller MFIs (RDRS, Shakti, SSS, and JCF) define better frontiers than others, while bigger MFIs (BRAC, ASA, and GB) have been catching up faster than others.

Keywords: Stochastic frontier output distance; total factor productivity (TFP); microfinance institutions (MFIs) (search for similar items in EconPapers)
JEL-codes: G21 Q12 Q14 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-eff and nep-mfd
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