Scale economies and input price elasticities in microfinance institutions

2013

Author's version of an article in the journal: Journal of Banking & Finance. Also available from the publisher at: http://dx.doi.org/10.1016/j.jbankfin.2012.08.004 We evaluate the efficiency of microfinance institutions (MFIs) using a structural approach which also captures these institutions' outreach and sustainability objectives. We estimate economies of scale and input price elasticities for lending-only and deposit-mobilizing MFIs using a large sample of high-quality panel data. The results confirm conjectures that improvements in efficiency can come from the growth or consolidations of MFIs, as we find substantial increasing returns to scale for all but profitability-focused deposit-m…