Investigating the unobserved heterogeneity effect on microfinance social efficiency

Fall, François Seck;Tchakoute Tchuigoua, Hubert;Vanhems, Anne;Simar, Léopold
(2022) , 28 pages

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Authors
  • Fall, François Seck
    Author
  • Tchakoute Tchuigoua, Hubert
    Author
  • Vanhems, Anne
    Author
  • Simar, LéopoldUCLouvain
    Author
Abstract
The main objective of this study is to assess the impact of unobserved heterogeneity on microfinance social efficiency analysis . Based on recent nonparametric techniques and directional distances, we identify a latent heterogeneity factor related to the microfinance institute (MFI) manager’s ability to promote women, independent of MFI size . We test for the significance of this unobserved factor and analyze the impact of MFI social inefficiency measures . Using a cross-country sample of 501 MFIs in 2011 from six main regions of the world, our findings reveal a significant effect of unobserved heterogeneity on the frontier and hence stress the importance of subjective factors in defining the set of production possibilities. We assess the robustness of our findings with the considered profit-oriented status and analyze the link between our unobserved heterogeneity factor and institutional and socioeconomic indicators.
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Fall, F. S., Tchakoute Tchuigoua, H., Vanhems, A., & Simar, L. (2022). Investigating the unobserved heterogeneity effect on microfinance social efficiency (LIDAM Discussion Paper ISBA 2022/10). https://hdl.handle.net/2078.5/109220