Efficiency of microfinance institutions in the Philippines

01.12.2014
Various standards and parameters are being used among microfinance institutions (MFIs) to assess the efficiency of their operations. In the case of the Philippines, the central bank, the Bangko Sentral ng Pilipinas (BSP) and the Cooperative Development Authority (CDA) are using performance standards to assess the overall performance of banks and cooperatives involved in microfinance. Efficiency is usually expressed through ratios of administrative efficiency, operational self-sufficiency, and loan officer productivity. This paper aims to assess efficiency beyond the ratios and will use data envelopment analysis (DEA) to measure the efficiencies of MFIs in the Philippines. From the selected input and outputs based on the standards prescribed for MFIs in the Philippines, the DEA efficiency scores were analysed based on different specifications. Furthermore, the paper also analysed the differences in efficiencies between non-governmental organization (NGO) MFIs and non-NGO MFIs. Results have shown that there is no MFI that can be efficient in all specified outputs; some MFIs are financially efficient but have to utilize more of their inputs in reaching out to more prospective clients. Also, non-NGO MFIs appear to be more financially efficient than their NGO counterparts.