Efficiency of microfinance institutions of South Asia: A bootstrap DEA approach

Abstract

The microfinance institutions (MFIs) operate with the dual goals; financial sustainability and social outreach. Therefore, the present paper aims to assess the twin objectives of MFIs operating in the selected four South Asian countries (i.e., Bangladesh, India, Nepal and Pakistan) during the financial year 2010 to 2015. First, we remove the outliers from the dataset by following Banker and Gifford (1988) and Banker and Chang (2006) guidelines. Thereafter, the study use bootstrap data envelopment analysis (DEA) by designing two separate models to measure bias-corrected financial and social efficiency estimates. The empirical results confirm that the South Asian MFIs remain more financially efficient than socially during the study period. Further, the Indian MFIs outperform in terms of both the aspects followed by Nepali and Bangladeshi MFIs, respectively. However, the Pakistani MFIs are the least performers in terms of both social outreach and financial sustainability.