EconPapers    
Economics at your fingertips  
 

Too Many Cooks Spoil the Broth: The Conflicting Impacts of Subsidies and Deposits on the Cost-Efficiency of Microfinance Institutions

Anastasia Cozarenco, Valentina Hartarska and Ariane Szafarz

No 19-001, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: The costs and benefits of subsidized microfinance are still a controversial topic. We evaluate how subsidies affect the cost-efficiency of microfinance institutions (MFIs). At the same time, we account for endogenous self-selection into the business models of credit-only versus credit-plus-deposit MFIs. Our findings draw a contrasting picture. First, they suggest that unsubsidized credit-plus-deposit MFIs have achieved optimal capacity and therefore constitute the most cost-efficient group of institutions in our sample. Second, the unsubsidized credit-only MFIs are the farthest away from their minimum cost. Between the two polar cases, there are subsidized institutions, among which the credit-only ones are closer to optimal capacity. Our results reveal the redundancy between subsidization and deposit-taking in microfinance. In conclusion, combining funds from donors and depositors tends to harm cost-efficiency.

Keywords: Microfinance; Cost efficiency; Scale economies; Subsidies; Deposit accounts (search for similar items in EconPapers)
JEL-codes: O14 D24 G21 O16 F35 (search for similar items in EconPapers)
Pages: 37 p.
Date: 2019-01-07
New Economics Papers: this item is included in nep-ban and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Published by:

Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/280911/3/wp19001.pdf Œuvre complète ou partie de l'œuvre (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sol:wpaper:2013/280911

Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/280911

Access Statistics for this paper

More papers in Working Papers CEB from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().

 
Page updated 2020-07-06
Handle: RePEc:sol:wpaper:2013/280911