We appreciate the helpful suggestions offered by Jim Barth, John Jahera, Bob DeYoung, seminar participants at the University of Sassari, as well as the comments of the editor and referees. We also appreciate the support of the Center for International Finance and Global Competitiveness at Auburn. We are also grateful to the Microfinance Center for Central and Eastern Europe and the Newly Independent States for providing the data.
Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model
Article first published online: 13 MAY 2009
© 2009 The Ohio State University
Journal of Money, Credit and Banking
Volume 41, Issue 4, pages 651–672, June 2009
How to Cite
CAUDILL, S. B., GROPPER, D. M. and HARTARSKA, V. (2009), Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model. Journal of Money, Credit and Banking, 41: 651–672. doi: 10.1111/j.1538-4616.2009.00226.x
- Issue published online: 13 MAY 2009
- Article first published online: 13 MAY 2009
- Received July 5, 2007; and accepted in revised form August 29, 2008.
- mixture model;
- Eastern Europe;
- Central Asia
Microfinance institutions (MFIs) play a key role in many developing countries. Utilizing data from Eastern Europe and Central Asia, MFIs are found to generally operate with lower costs the longer they are in operation. Given the differences in operating environments, subsidies, and organizational form, this finding of increasing cost effectiveness may not aptly characterize all MFIs. Estimation of a mixture model reveals that roughly half of the MFIs are able to operate with reduced costs over time, while half do not. Among other things, we find that larger MFIs offering deposits and those receiving lower subsidies operate more cost effectively over time.