On the efficiency effects of subsidies in microfinance: an empirical inquiry

Marek Hudon, Daniel Traça

Research output: Contribution to journalArticle

96 Citations (Scopus)
15 Downloads (Pure)

Abstract

Using an original database of rating agencies, this paper gives empirical evidence on the impact of subsidy intensity on the efficiency of Microfinance Institutions (MFIs). We find that subsidies have had a positive impact on efficiency, in the sense that MFIs that received subsidies are more efficient than those that do not. However, we find also that subsidization beyond a certain threshold renders the marginal effect on efficiency negative. In our sample, 26% of MFIs receive levels of subsidization higher than that threshold, which implies that a marginal cut on subsidy intensity would increase their efficiency.

Original languageEnglish
Pages (from-to)966-973
Number of pages8
JournalWorld Development
Volume39
Issue number6
DOIs
Publication statusPublished - 1 Jun 2011

Keywords

  • Efficiency
  • Microfinance
  • Productivity
  • Subsidies

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