Skip to main content
SpringerLink
Log in

Impact of Regulation on the Cost Efficiency of Microfinance Institutions in Bangladesh

  • Chapter
Microfinance Institutions

Part of the book series: Palgrave Studies in Impact Finance ((SIF))

Abstract

The increasing recognition of microfinance as an instrument of poverty alleviation has created numerous microfinance institutions (henceforth, MFIs) in Bangladesh. Albeit, the top five MFIs control around 60 per cent of the microcredit market, both horizontal and vertical growth over the past two decades ended up at more than 750 MFIs with a network of over 17 thousand branches (CDF and InM 2011). These institutions emerged as self-regulated non-government social organizations. Nevertheless, self-regulation appeared to be inadequate to protect interest of member savings and lenders with growing number of evidences of unscrupulous behaviour of the management and/or indiscernible exit of some of these institutions from the credit market.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 84.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Baltagi, B.H. (2008) Econometric analysis of panel data. John Wiley & Sons, New York, USA

    Google Scholar 

  • Barry, T.A., & Tacneng, R. (2011). ‘Governance and performance: evidence from African microfinance institutions’, Laboratoire d’Analyze et Prospective Économiques (LAPE) Working paper, Université de Limoges, Limoges, France

    Google Scholar 

  • Battese, G.E., and Coelli, T.J. (1995). ‘A model for technical inefficiency effects a stochastic frontier function for panel data’, Empirical Economics, 20(2), pp. 325–332

    Article  Google Scholar 

  • Benston G., Hanweck, G., & Humphrey, D. (1982). ‘Scale economies in banking: A restructuring and reassessment’, Journal of Money, Credit and Banking, 14(4), pp. 435–456

    Article  Google Scholar 

  • Benston, G.J., Berger, A.N., Hanweck, G.A., & Humphrey, D.B. (1983) ‘Economies of scale and scope in banking’. In Proceedings of a Conference on Bank Structure and Competition. Federal Reserve Bank of Chicago, Chicago, USA

    Google Scholar 

  • Bjurek, H., Hjalmarsson, L., & Førsund, F.R. (1990). ‘Deterministic parametric and nonparametric estimating of efficiency in service production’, Journal of Econometrics, 46(1–2), pp. 213–227

    Article  Google Scholar 

  • CDF and InM (Credit and Development Forum and Institute of Microfinance) (2006–2011) Bangladesh Microfinance Statistics 2006–2011. CDF and InM, Dhaka, Bangladesh

    Google Scholar 

  • Chavez, R. & Gonzalez-Vega, C. (1994) ‘Principles of Regulation and Prudential Supervision and their Relevance for Microenterprise Finance Organization’. In Otero, M. & Rhyne, E. (Eds), New World of Microenterprise Finance. The Kumarian Press, West Hartford, CT, USA

    Google Scholar 

  • Cooper, W.W. & Tone, K. (1997). ‘Measures of Inefficiency in Data Envelopment Analysis and Stochastic Frontier Estimation’, European Journal Operational Research, 99(1), pp. 72–88

    Article  Google Scholar 

  • Cull, R., Demirguc-Kunt, A., & Morduch, J. (2011). ‘The Effect of Regulation on MFI Profitability and Outreach’, World Development, 39(6), pp. 949–965

    Article  Google Scholar 

  • Diamond, D.W. & Dybvig, P.H. (1983). ‘Bank Runs, Deposit Insurance, and Liquidity’, Journal of Political Economy, 91(3), pp. 401–419

    Article  Google Scholar 

  • Edwards, F.R. (1977). ‘Managerial Objectives in Regulated Industries: Expense Preference Behavior in Banking’, Journal of Political Economy, 85(1), pp. 147–162

    Article  Google Scholar 

  • Ferrier, G.D. & Lovell, C.A.K. (1990). ‘Measuring Cost Efficiency in Banking: Econometric and Linear Programming Evidence’, Journal of Econometrics, 46(1–2), pp. 229–245

    Article  Google Scholar 

  • Gilligan, T. & Smirlock, M. (1984). ‘An Empirical Study of Joint Production and Scale Economies in Commercial Banking’, Journal of Banking & Finance, 8(March), pp. 67–77

    Article  Google Scholar 

  • Gilligan, T., Smirlock, M., & Marshall, W. (1984). ‘Scale and Scope Economies in The Multi-Product Banking Firm’, Journal of Monetary Economics, 13(3), pp. 393–405

    Article  Google Scholar 

  • Giokas, D.I. (1991). ‘Bank Branch Operating Efficiency: A Comparative Application of DEA and the Log-Linear Model’, Omega, 19(6), pp. 549–557

    Article  Google Scholar 

  • Gonzalez, A. (2007). ‘Efficiency Drivers of Microfinance Institutions (MFIs): The Case of Operating Costs’, MicroBanking Bulletin, 15.

    Google Scholar 

  • Hartarska, V. & Nadolnyak, D. (2007). ‘Do Regulated Microfinance Institutions Achieve Better Sustainability and Outreach? Cross-country Evidence’, Applied Economics, 39(10–12), pp. 1207–1222

    Article  Google Scholar 

  • Hermes, N., Lensink, R., & Meesters, A. (2011). ‘Outreach and Efficiency of Microfinance Institutions’ World Development, 39(6), pp. 938–948

    Article  Google Scholar 

  • Hudon, M. & Traca, D. (2011). ‘On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry’, World Development, 39(6), pp. 966–973

    Article  Google Scholar 

  • Huq, M., Skully, M.T., & Pathan, S. (2009). ‘Efficiency of Microfinance Institutions: A Data Envelopment Analysis’, Asia-Pacific Financial Markets, 17(1), pp. 63–97

    Article  Google Scholar 

  • Jacobs, R. (2000). ‘Alternative Methods to Examine Hospital Efficiency: Data Envelopment Analysis and Stochastic Frontier Analysis’, Centre for Health Economics (CHE) Discussion Paper 177, University of York, Heslington, UK

    Google Scholar 

  • Khaled, K.I. (2001) ‘Legal Environment of MFI operations’. In Sharif, I. & Wood, G. (Eds), Challenges for Second Generation Microfinance - Regulation, Supervision and Resource Mobilization. The University Press Limited, Dhaka, Bangladesh

    Google Scholar 

  • Khalily, B. & Imam, M.O. (2001) ‘Behavior of Microfinance Institutions and the Case for Regulation and Supervision’. In Sharif, I. & Wood, G. (Eds), Challenges for Second Generation Microfinance - Regulation, Supervision and Resource Mobilization. The University Press Limited, Dhaka, Bangladesh

    Google Scholar 

  • Khalily, M.A.B., Imam, M.O., & Khan, S.A. (2000). ‘Efficiency and Sustainability of Formal and Quasi-Formal Microfinance Programmes: An Analysis of Grameen Bank and ASA’, The Bangladesh Development Studies, 26(2/3), pp. 103–146

    Google Scholar 

  • Khandker, S.R. (1996). ‘Grameen Bank: Impact, Cost, and Program Sustainability’, Asian Development Review, 14(1), pp. 65–85

    Google Scholar 

  • Khandker, S.R., Khalily, B., & Khan, Z. (1995). ‘Grameen Bank: Performance and Sustainability’, World Bank Discussion Papers 306, The World Bank, Washington, DC, USA

    Google Scholar 

  • Latif, M.A., Hasan, M., & Khaleque, M.A. (2013). ‘Effectiveness of MRA regulations in the microfinance sector: The user perspective’, (Research Report). Institute of Microfinance, Dhaka, Bangladesh

    Google Scholar 

  • Masood, T. & Ahmad, M.I. (2008). ‘Technical Efficiency of Microfinance Institutions in India: A Stochastic Frontier Approach’, MPRA Paper 25454, Retrieved from MPRA: http://mpra.ub.uni-muenchen.de/25454/MPRA Paper No. 25454

    Google Scholar 

  • Mersland, R. & Strøm, R.Ø. (2009). Performance and Governance in Microfinance Institutions’, Journal of Banking & Finance, 33(4), pp. 662–669

    Article  Google Scholar 

  • MRA (Microcredit Regulatory Authority). (2005–2012) NGO-MFIs in Bangladesh. Microcredit Regulatory Authority, Dhaka, Bangladesh

    Google Scholar 

  • Murray, J.D. & White, R.W. (1983). ‘Economies of Scale and Economies of Scope in Multi-Product Financial Institutions: A Study of British Columbia Credit Unions’, Journal of Finance, 38(3), pp. 887–911

    Article  Google Scholar 

  • PKSF (Palli Karma-Sahayak Foundation). (2003–2011) Annual Report. Palli Karma- Sahayak Foundation, Dhaka, Bangladesh

    Google Scholar 

  • Quayes, S. & Khalily, B. (2013). ‘Efficiency of Microfinance Institutions in Bangladesh’, Working Paper Number 19, Institute of Microfinance, Dhaka, Bangladesh

    Google Scholar 

  • Randøy, T., Strøm, R. Ø., & Mersland, R. (forthcoming). ‘The Impact of Entrepreneur-CEOs in Microfinance Institutions: A Global Survey’, Entrepreneurship Theory and Practice. 39(4)

    Google Scholar 

  • Rahman, R.I. & Rashid, L. (2011) Microfinance Regulations for Development - Global Experiences. MRA and the UPL, Dhaka, Bangladesh

    Google Scholar 

  • Resti, A. (1997). ‘Evaluating the Cost Efficiency of the Italian Banking System: What can be Learned from the Joint Application of Parametric and Non-parametric Techniques’, Journal of Banking & Finance, 21(2), pp. 221–250

    Article  Google Scholar 

  • Sinha, S. (2011) Bangladesh microfinance review. BRAC Development Institute, Dhaka, Bangladesh

    Google Scholar 

  • Smith, C.W. & Jerome, B.W. (1979). ‘On Financial Contracting: An Analysis of Bond Covenants’, Journal of Financial Economics, 7(1979), pp. 117–161

    Article  Google Scholar 

  • Smith, N., Smith, V., & Verner, M. (2006). ‘Do Women in Top Management Affect Firm Performance? A Panel Study of 2300 Danish Firms’, International Journal of Productivity and Performance Management, 15(7), pp. 569–593

    Article  Google Scholar 

  • Strøm, R.Ø., D’Espallier, B., & Mersland, R. (2014). ‘Female leadership, performance and governance in microfinance institutions’, Journal of Banking & Finance, 42(C), pp. 60–75

    Article  Google Scholar 

  • Stiglitz, J.E. & Weiss, A. (1981). ‘Credit Rationing in Markets with Imperfect Information’, The American Economic Review, 71(3), pp. 393–410

    Google Scholar 

  • Welbourne, T.M. (1999). ‘Wall Street Likes its Women: An Examination of Women in the Top Management Teams of Initial Public Offerings’, CAHRS Working Paper 99–07, Cornell University, Ithaca, NY, USA

    Google Scholar 

Download references

Authors
  1. M. A. Banqui Khalily
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. M. Abdul Khaleque
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. S. Badruddoza
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. University of Agder, Norway

    Roy Mersland

  2. Oslo and Akershus University College and Telemark University College, Norway

    R. Øystein Strøm

Copyright information

© 2014 M. A. Banqui Khalily, M. Abdul Khaleque and S. Badruddoza

About this chapter

Cite this chapter

Khalily, M.A.B., Khaleque, M.A., Badruddoza, S. (2014). Impact of Regulation on the Cost Efficiency of Microfinance Institutions in Bangladesh. In: Mersland, R., Strøm, R.Ø. (eds) Microfinance Institutions. Palgrave Studies in Impact Finance. Palgrave Macmillan, London. https://doi.org/10.1057/9781137399663_8

Download citation

Publish with us

Policies and ethics

Search

Navigation