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Measuring Financial and Social Outreach Productivity of Microfinance Institutions in Bangladesh

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Abstract

The productive employment of scarce resources to achieve financial sustainability and social outreach among microfinance institutions (MFIs) has become a key concern of policymakers and practitioners. In view of its importance, this study adopted the Malmquist total factor productivity approach with a balanced panel dataset of 162 MFIs ranging from 2007 to 2012 to measure productivity performance. The results indicate that the microfinance sector in Bangladesh exhibited 4.3 % in overall productivity progress, attributed mainly to better managerial efficiency. Further splitting the output into financial and social outreach, known as ‘dual mission’, this study observed 3.9 and 5 % productivity progress per annum respectively, with five best practising MFIs being identified due to their balanced growth in both objectives. Although, depth of social outreach productivity (proxy by average loan size) recorded successive progress during the study period (2007–2012), breadth of social outreach productivity (proxy by number of savers) improved little due to the lack of innovative savings products. Thus, basing their designing of comprehensive savings products and development of appropriate synergies on the best five performing MFIs, the government and respective authorities should stimulate the transfer of their innovative practices to other MFIs to enhance sectorial growth and better serve the poor community.

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Notes

  1. Although most of the researchers have used the term ‘outreach’, we prefer to use ‘social outreach’ to emphasize the social outcomes.

  2. Compartamos Banco, founded in Mexico in 1990, and currently one of the largest microfinance banking institutions in Latin America serving more than 2.5 million clients with diverse financial products.

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Acknowledgments

Authors would like to thank the editor and three anonymous referees for their constructive comments and valuable suggestions. Their comments and suggestions have substantially enhanced the quality of the paper. The first author thank Shamima Nasrin, Mehedi Masud, Hasanul Banna, Dr. Zhang Miao and Zhang Cheng for their suggestions and comments. The first author also would like to thank University of Malaya for funding his doctoral studies through Bright Spark Program.

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  1. Department of Development Studies, Faculty of Economics and Administration, University of Malaya, 50603, Kuala Lumpur, Malaysia

    Md Aslam Mia & V. G. R. Chandran

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  1. Md Aslam Mia
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  2. V. G. R. Chandran
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Correspondence to Md Aslam Mia.

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Appendices

Appendix 1

See Table 7.

Table 7 Selected best practicing MFIs based on their productivity (overall) performance (2007–2012)
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Appendix 2

See Table 8.

Table 8 Best practising MFIs in terms of depth of social outreach based on their productivity performance
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Mia, M.A., Chandran, V.G.R. Measuring Financial and Social Outreach Productivity of Microfinance Institutions in Bangladesh. Soc Indic Res 127, 505–527 (2016). https://doi.org/10.1007/s11205-015-0979-5

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