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Performance of microfinance institutions in achieving the poverty outreach and financial sustainability: When age and size matter?

Wijesiri, Mahinda and Yaron, Jacob and Meoli, Michele (2015): Performance of microfinance institutions in achieving the poverty outreach and financial sustainability: When age and size matter?

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Abstract

Using a two-stage DEA bootstrapped metafrontier approach, we investigate the effects of age and size on efficiency estimates of microfinance institutions (MFIs). In the first-stage, we use a metafrontier model combining with DEA bootstrapped procedure to obtain statistically robust and comparable efficiencies. In the second-stage, we employ a bootstrapped truncated regression to account for the impact of exogenous factors on both dimensions of efficiency. Results highlight the importance of model specification for MFIs operating in different geographical regions. Moreover, we find that although older MFIs perform better than younger ones in terms of achieving financial results, they are relatively inefficient in achieving outreach objectives. We also document that MFI size matters: larger MFIs tend to have higher financial and outreach efficiency.

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