Evaluating the Efficiency of Microfinance Institutions in Vietnam and the Impact of this Efficiency on Poverty Reduction

Abstract

Microfinance plays a crucial role to reduce the poverty in developing countries. For that reason, the effectiveness of microfinance institutions (MFIs) is widely investigated in the literature. This study examines the levels of efficiency of MFIs in Vietnam and their determinants. The research, then, evaluates the relationship between MFIs’ efficiency and poverty reduction. Data are mainly taken from the MIX market website and other empirical researches. Regarding the methodology, two-stage data envelopment analysis (DEA) is used to estimate MFIs’ efficiency scores in Vietnam and their determinants, while meta-analysis and statistic descriptions are employed to examine the relationship between MFIs’ efficiency and poverty reduction. The findings show that technical efficiency (TE) of MFIs in Vietnam is considerably high with the average TE score and efficiency of scale being 85.5% and 94.7%, respectively. Size, age, outreach, and market target of MFIs are found not to be determinants of efficiency, while capital structure is. Also, many researches confirm the impact of MFIs’ efficiency to poverty reduction. However, the relationship is different between countries because of particular characteristics and operational mechanisms.