Determinants of Total Factor Productivity in Microfinance Institutions: Evidence from Bangladesh
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This chapter aims to evaluate productivity and determinants of productivity in microfinance institutions (MFIs) to support the ongoing debate on sustainability in the microfinance industry. Hence, the longitudinal data of 169 MFIs, covering the period from 2009 to 2014, were collected from the Microcredit Regulatory Authority annual reports in Bangladesh. This study used the two-stage semi-parametric approach. In the first stage, the Malmquist Productivity Index (nonparametric) was employed and it was found that the microfinance industry in Bangladesh observed an average of 3.6% productivity progress per annum, with a declining trend towards the end of the study period. In the second stage, the regression analysis (parametric) showed that institutional characteristics, macroeconomic factors and external sources of funds significantly affect productvity of MFIs. Findings and policy implications are further discussed.
The author is very grateful to his supervisor Assoc. Prof. Dr. VGR Chandran and Dr. Lee Hwok-Aun for their helpful guidance in the process of completing this manuscript. The author also appreciates feedback from the anonymous reviewer and Dr. Yizhe Dong. Informal academic discussions with Zhang Cheng (Dana), Hasanul Banna and Sohel Rana are very much appreciated. The author is currently serving as a research intern at South Asia Regional Department (SARD), Asian Development Bank, Philippines. All remaining errors are my own.
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