Efficiency of Microfinance Institutions in Bangladesh

Abstract

This study presents an empirical analysis of the cost efficiency of a sample of microfinance institutions (MFIs) operating in Bangladesh. These MFIs substantially vary in size and can also be characterized by their affiliation with donor and funding agencies. Therefore, the measurement of their performance poses an important challenge for the donor agencies and policymakers. Using stochastic frontier models in the measurement of the level of efficiency for the MFIs, the study suggests that larger MFIs are more efficient with some evidence of a trade-off between efficiency and outreach.