Assessment Of Institutional Performance And Sustainability Of Selected Microfinance Institutions A Data Envelopment Analysis Approach

In this study attempts are made to evaluate the institutional performance andrnsustainability of six MFIs employing conventional financial performance andrnsustainability indicators and non-parametric DEA-based malmquist total factorrnproductivity index model. The study period covered 2003 to 2009. DEA-based malmquistrntotal factor productivity index model is applied on panel data to derive total factorrnproductivity growth under both production and intermediation approach which could berndecomposed as technological change and technical efficiency change.rnThe results of conventional financial performance and sustainability indicators revealedrnthat all MFIs‘ outreach performance has increased during the study period. Despite thernincrease in outreach performance, it is difficult for the institutions to operate and expandrnwithout subsidies. This is reflected by their financial self-sufficiency ratios. During thernstudy period all most all MFIs in the sample reported below the minimum requirementrnfinancial self-sufficiency ratio. This indicated the long-term sustainability of MFIs is inrnquestion once the subsidies are dried-up. Respondents‘ response also confirmed thatrngrants are preferable as primary source of fund rather than retained earnings and memberrnsaving.rnIn the study the researcher identified that, technological change has higher valuernrelevance than technical efficiency gain. By decomposing technical efficiency thernresearcher also observed pure technical efficiency gain has a substantially higherrnexplanatory power than scale efficiency gain The researcher also found that the intermediation services which is the responsibility ofrnthe MFIs to transfer funds from surplus groups such as from savers and donors to therndeficit groups particularly borrowers or investors are more productive than the productionrnresponsibility of MFIs which considers the institutions as producers of deposits andrnloans. During the study period the institutions reported average productivity growth ofrn20.7% under both input and output oriented intermediation approach. In both cases thernshift in total factor productivity was observed due to technological progress. Under thernproduction approach in both input and output oriented measures an average productivityrndeterioration of 5.3% was identified. This decline in productivity was the result of 5.6%rnretrogresses in technology, though there was a marginal 0.4% gain in technicalrnefficiency

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