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The impact of subsidies on the sustainability of microfinance institutions

  • Measuring the influence of subsidies on the sustainability of microfinance institutions is a major challenge. This dissertation shows that the Subsidy Dependence Index remains the most promising ratio to calculate the subsidy received and measure microfinance institutions’ dependence on subsidies to conduct further research on the institutions’ ability to become socially and financially sustainable. By comparing the Subsidy Dependence Index to alternative measurements, a detailed discussion, and an exemplary calculation, its applicability to addressing the research gap of microfinance institutions’ reliance on subsidies to improve their efficiency can be shown. A calculation for 224 microfinance institutions serving 23.5 million active borrowers shows its applicability for large-scale data sets. Focusing on the microfinance institution (MFI), this research project takes an institutionalist approach. Since efficiency is the prerequisite to sustainability, the hypothesis that subsidies have a conflicting influence on microfinance institutions’ financial and social efficiency has been tested using a reduced panel of 216 microfinance institutions. A multi-input/ multi-output data envelopment analysis (DEA) is applied to determine financial and social efficiency beyond ratios. The efficiency scores that serve as a proxy for sustainability are then used as dependent variables in panel data regressions. The main finding is that subsidies have a negative but only marginal effect on efficiency. However, the effect is only strongly significant regarding social efficiency. To the best of the author’s knowledge, there is no research done to evaluate the influence of subsidies on financial and social efficiency based on a DEA.

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Metadaten
Author:Patrick Fritz Gereon Huber
URN:urn:nbn:de:hbz:992-opus4-9744
Place of publication:Vallendar
Referee:Jürgen Weigand, David Audretsch
Document Type:Doctoral Thesis
Language:English
Date of Publication (online):2024/03/21
Date of first Publication:2024/03/21
Publishing Institution:WHU - Otto Beisheim School of Management
Granting Institution:WHU - Otto Beisheim School of Management
Date of final exam:2023/11/17
Release Date:2024/03/21
Tag:Effektivität; Hauptkomponentenanalyse; Mikrofinanzierung; Nachhaltigkeit; Subvention
Data envelopment analysis; Efficiency; Microfinance; Principal component analysis; Subsidy; Sustainability
Page Number:135
Institutes:WHU Economics Group / Institute for Industrial Organization
Licence (German):Copyright this PhD thesis