Economic Analysis and International Law
Chapter 6: Operational efficiency, corruption, and political stability in microfinance
In recent decades, rapid growth and great diversity has emerged in the market for microfinance, with microfinance institutions (MFIs) - increasingly engaged in finding the right balance between profit and social commitment - becoming, within a short time, a "vast network of institutions" (Zacharias 2008). Hence, for these companies there arises the need for increasing financial development and self-sufficiency, indispensable ingredients to achieve a good level of maturity. Starting from this premise, Arnone, Bellavite Pellegrini, and Messa (hereafter ABPM) (2010) examined and assessed the relevance of financial variables with respect to the level of efficiency of MFIs. The difficult situation facing microfinance institutions in Africa is clear to all and, in this regard, it is important to note that these intermediaries have extremely high operating costs. This aspect has contributed, maybe decisively, to severely limit their development (mainly because of very low, or completely absent, profit margins), negatively affecting the quality of services offered and the number of clients. In other continents, such as Asia, MFIs have achieved much lower costs, above all thanks to higher efficiency levels which have impacted positively on the development of microfinance in this region. It is clear that achieving a high level of efficiency is a priority, not only to foster the development of the sector, but also for a wider dissemination of the product.
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