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On the efficiency effects of subsidies in microfinance: an empirical inquiry

Marek Hudon and Daniel Traca

No 06-020.RS, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: The impact of subsidies on the efficiency of microfinance institutions (MFIs) is a key question in the field, given the large volume of subsidies received over the last twenty years. Using an original database of rating agencies, this paper gives empirical evidence on the impact of subsidy intensity on the efficiency of MFIs. After correcting for endogeneity bias, our results suggest that subsidies have contributed to raise efficiency, for the majority of MFIs in our sample. However, the evidence suggests also that there is a level beyond which increased subsidization taxes efficiency, at the margin. In our sample, 50% of MFIs receive levels of subsidization higher than that threshold.

Keywords: Microfinance; Subsidies; Sustainability. (search for similar items in EconPapers)
JEL-codes: G30 G32 J23 (search for similar items in EconPapers)
Pages: 39 p.
Date: 2006-10
New Economics Papers: this item is included in nep-dev, nep-fin, nep-fmk and nep-mfd
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Published by: Centre Emile Bernheim

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https://dipot.ulb.ac.be/dspace/bitstream/2013/9239/1/dt-0010.pdf dt-0010 (application/pdf)

Related works:
Journal Article: On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry (2011) Downloads
Working Paper: On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry (2011)
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