Efficiency and productivity analysis of global not-for-profit microfinance institutions : data envelopment analysis approach

• Main Author: Widiarto, Indra
• Published: Aston University 2017
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.760142

Microfinance has been regarded as the one of the effective solutions in poverty alleviation efforts globally. Its growth has been driven by not‐for‐profit microfinance institutions in the form of non‐governmental organization, credit unions, cooperatives and others. Microfinance sits at the unique position between social welfare programme and financial institutions as it faces dual objectives of outreach to the poor and financial sustainability. Due to its unique dual objectives, it is imperative to undertake a comprehensive performance and productivity assessment as microfinance institutions currently hold an important roles in improving the lives of the poor globally. This thesis thus has multi‐faceted objectives: firstly, it seeks to propose a comprehensive performance measurement that can evaluate these objectives comprehensively, as opposed to current focus on trade‐offs between microfinance dual objectives and shortsighted focus on financial indicator, yet proficient to track microfinance performance and total factor productivity over time. It therefore proposes Data Envelopment Analysis (DEA) as adept measurement for microfinance institutions globally, especially using hyperbolic, non‐oriented DEA model due to its benchmarking capability and DEA‐based Circular Malmquist Index in measuring total factor productivity under condition of unbalanced data, such as the case with microfinance. This thesis also proposes Social‐Financial Efficiency Matrix as a performance monitoring tool for microfinance. Secondly, this thesis seeks to provide thought‐provoking empirical evidence to the performance comparison between Islamic and conventional microfinance. Thirdly, it seeks to explore the relationship between loan methodology and microfinance efficiency in six different regions globally, in contributing to the search of an adept loan method that can boost efficiency. Fourthly, it seeks to analyse microfinance productivity globally in times of crisis, i.e. evaluating its resilience toward external shocks, so that improvement can be proposed for the future.