This Is AuburnElectronic Theses and Dissertations

Scale Economies in MFIs Abroad and Comparable U.S. Financial Institutions




James, Natalie

Type of Degree



Agricultural Economics and Rural Sociology


The three essays of this dissertation employ a system of seemingly unrelated equations, each with a cost function and production input equations to determine the scale or point of production along the long-run average total cost curve for two samples of microfinance institutions and for a sample of U.S. Community Development Banks. Each essay is unique in its discovery. The first essay determines the scale of a large global sample of rated MFIs to be less than one and concludes that physical capital is an elastic input for production. The second essay explores the efficiency of MFIs by their organizational types and finds that NGOs (non-profits) are more efficient than regulated rural banks and non-bank financial institutions suggesting that non-profits may be in a better position to meet the needs of the poor. Eastern European MFIs are found to produce at their optimal scale while more growth opportunity lies with the African and South Asian MFIs. The third essay uses a 2 output (Loans and NII, non-interest income), 4 input model to determine the effect of off-balance sheet activity on efficiency. The TARP distributions are noted and evidence is documented on current pay back of TARP funds by these institutions. There does not appear to be a strong relationship between TARP funds received and production cost.