Analysis of the Cost-Efficiency of Microfinance Institutions in the West African Economic Monetary Union Area
Togba, Leadaut Edith Prisca
African Economic Research consortium
The cost-efficiency of microfinance institutions (MFIs) has emerged as an issue crucial to their survival and the continuity of their services. The present study uses the stochastic frontier method to analyse the levels and determinants of cost-efficiency of a sample of microfinance institutions operating from the West African Economic and Monetary Union (WAEMU) area. For the 2000–2008 period, these MFIs were found to have functioned in an ineffective way in terms of minimizing their costs. Factors influencing cost-efficiency include the age and type of MFI. The study’s results also reveal that the number of female borrowers, the MFI’s financial performance, level of capitalization, geographical location, and size were explanatory factors for the cost-efficiency of the MFIs studied.