Contact Us

For Marketing, Sales and Subscriptions Inquiries
Rockefeller Center, 45 Rockefeller Plaza
20th Flr Unit #5, New York, NY 10111
United States

Conference List

International Journal of Business, Economics and Management

February 2020, Volume 7, 2, pp 120-130

Efficiency of Microfinance (MF) Institutions in Bangladesh: A Study on Top 10 MF Institutions

Dilruba Afroze


Md. Riad Us Salehin

Dilruba Afroze 1 ,

Md. Riad Us Salehin 1 
  1. Department of Business Administration in Accounting & Information Systems, Faculty of Business Studies, Bangladesh University of Professionals (BUP) Mirpur Cantonment, Mirpur, Dhaka, Bangladesh. 1

Pages: 120-130

DOI: 10.18488/journal.62.2020.72.120.130

Share :

Article History:

Received: 22 January, 2020
Revised: 26 February, 2020
Accepted: 30 March, 2020
Published: 17 April, 2020


Bangladesh has been referred to as “the birthplace (and sometimes as the 'Mecca') of microfinance all over the world. However, there are very few studies that investigate the efficiency of this industry. This paper aims to find the efficiency of the top 10 (in terms of market share) Microfinance Institutions (MFIs) of Bangladesh. The data were collected from secondary sources and annual reports of the 10 MFIs were used extensively. Data Envelopment Analysis (DEA) method was used to measure the efficiency of those MFI and regression analysis to test the hypothesis. The DEA method measures efficiency by analyzing the inputs and outputs. The inputs for this paper were the number of employees (NE), Fixed Asset (FA) and Operating Expenses (OE) of each MFI. Based on these inputs, DEA measures the efficiency by comparing the outputs. The outputs were the amount of Loan Outstanding (LO) and Deposits of Members (DM) of each firm. This method not only measures the efficiency but also provides recommendation to minimize the inputs and maximize the outputs. The result of this study reveals that only 30% of the top 10 MFIs are operating with their full potential and their average efficiency rate is 65.5%. MFIs that are not operating under their optimal size, they have a 94.9% of average efficiency rate. However, it was found that in terms of collecting deposits, 60% of the top 10 MFIs are efficient whereas, only 10% are efficient in terms of disbursing loans.
Contribution/ Originality
This study documents by focusing on the efficiency of some of the leading MFIs, who are campaigning that they are working for poor women, but are seemed to be inefficient and having public perceptions that these MFIs have their own agenda of making wealth in the name of helping poor.


Microfinance, Efficiency, Bangladesh, Data envelopment analysis (DEA), Input, Output.


Ahmed, S. M., Adams, A. M., Chowdhury, M., & Bhuiya, A. (2000). Gender, socioeconomic development and health-seeking behaviour in Bangladesh. Social Science & Medicine, 51(3), 361-371.Available at:

Bagazonzya, H., Safdar, Z., Abdullah, A., Niang, C., & Rahman, A. (2010). Linking up and reaching out in Bangladesh Information and communications technology for microfinance. Retrieved from: [Accessed 9 Apr. 2020].

Bairagi, S. (2014). Productivity and efficiency analysis of microfinance institutions (MFIS) in Bangladesh - Munich personal repec archive. Retrieved from: [Accessed 11 Jun. 2019].

Bateman, M. (2012). The role of microfinance in contemporary rural development finance policy and practice: Imposing neoliberalism as ‘best practice’. Journal of Agrarian Change, 12(4), 587-600.Available at:

Bell, F. W., & Murphy, N. B. (1968). Economies of scale and division of labor in commercial banking. Southern Economic Journal, 35(2), 131-139.Available at:

Benston, G. J. (1965). Branch banking and economies of scale. The Journal of Finance, 20(2), 312-331.Available at:

Benston, G. J., Hanweck, G. A., & Humphrey, D. B. (1982). Scale economies in banking: A restructuring and reassessment. Journal of Money, Credit and Banking, 14(4), 435-456.Available at:

Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429-444.Available at:

Chowdhury, A. M. R., & Bhuiya, A. (2004). The wider impacts of BRAC poverty alleviation programme in Bangladesh. Journal of International Development, 16(3), 369-386.Available at:

Develtere, P., & Huybrechts, A. (2005). The impact of microcredit on the poor in Bangladesh. Alternatives, 30(2), 165-189.Available at:

Duvendack, M., Palmer-Jones, R., Copestake, J., Hooper, L., Loke, Y., & Rao, N. (2011). What is the evidence of the impact of microfinance on the well-being of poor people? Systematic review. Retrieved from: [Accessed 9 Apr. 2020].

Ghosh, J. (2013). Microfinance and the challenge of financial inclusion for development. Cambridge Journal of Economics, 37(6), 1203-1219.Available at:

Hossain, M., & Bayes, A. (2015). Rural credit market. In: M. Hossain and A. Bayes, eds., Leading issues in rural development: Bangladesh perspective. Dhaka: A H Development Publishing House.

Hulme, D., & Maitrot, M. (2014). Has microfinance lost its moral compass? Economic and Political Weekly, 77-85.

Hussain, A. B. (2010). Embodiment and emotionality of women credit clients: Scrutinizing agency constraints of microcredit clients in Sunamganj, Bangladesh. Asian Social Science, 6(11), 3.Available at:

Imai, K. S., & Azam, M. S. (2012). Does microfinance reduce poverty in Bangladesh? New evidence from household panel data. Journal of Development Studies, 48(5), 633-653.Available at:

Imai, K. S., Gaiha, R., Thapa, G., & Annim, S. K. (2012). Microfinance and poverty—a macro perspective. World Development, 40(8), 1675-1689.Available at:

Khandker, S. (2003). Micro-finance and poverty: Evidence using panel data from Bangladesh. [online] Policy Research Working Papers. The World Bank. Retrieved from: [Accessed 9 Apr. 2020].

Khandker, S., Khalily, B., & Samad, H. (2016). Beyond ending poverty: The dynamics of microfinance in Bangladesh. OKR. Retrieved from: [Accessed 28 Mar. 2020].

Khandker, S. R. (2000). Savings, informal borrowing, and microfinance. The Bangladesh Development Studies, 26(2–3), 49-78.

Khandker, S. R. (2005). Microfinance and poverty: Evidence using panel data from Bangladesh. The World Bank Economic Review, 19(2), 263-286.Available at:

Kočišová, K. (2013). Technical efficiency of top 50 world banks. Research Gate. Retrieved from: [Accessed 10 Mar. 2020].

Mazumder, M. S. U., & Lu, W. (2015). What impact does microfinance have on rural livelihood? A comparison of governmental and non-governmental microfinance programs in Bangladesh. World Development, 68, 336-354.Available at:

Mia, A. (2017). An overview of the microfinance sector in Bangladesh. Research gate. Retrieved from: [Accessed 27 Mar. 2020].

Morduch, J. (1999). The microfinance promise. Journal of Economic Literature, 37(4), 1569-1614.Available at:

Morduch, J. (2000). The microfinance schism. World Development, 28(4), 617-629.Available at:

Mosley, P., & Hulme, D. (1998). Microenterprise finance: Is there a conflict between growth and poverty alleviation? World Development, 26(5), 783-790.Available at:

Quayes, S. (2012). Depth of outreach and financial sustainability of microfinance institutions. Applied Economics, 44(26), 3421–3433.

Quayes, S. (2015). Outreach and performance of microfinance institutions: A panel analysis. Applied Economics, 47(18), 1909-1925.Available at:

Quayes, S., & Khalily, B. (2013). Efficiency of microfinance institutions in Bangladesh. Economics Bulletin. Retrieved from: [Accessed 10 Mar. 2020].

Rahman, T. (2019). Regulations of microcredit & financial institutions in Bangladesh. Tahmidur Rahman. Retrievedfrom: [Accessed 12 Feb. 2020].

Roodman, D., & Morduch, J. (2014). The impact of microcredit on the poor in Bangladesh: Revisiting the evidence. Journal of Development Studies, 50(4), 583-604.Available at:

Sherman, H. D., & Gold, F. (1985). Bank branch operating efficiency. Journal of Banking & Finance, 9(2), 297–315.

Sriram, M. (2012). The AP microfinance crisis 2010: Discipline or death? Vikalpa, 37(4), 113-128.Available at:

Swain, R. B., & Floro, M. (2012). Assessing the effect of microfinance on vulnerability and poverty among low income households. Journal of Development Studies, 48(5), 605-618.Available at:

The Daily Star. (2019). The invisible hand of microfinance. Retrieved from: [Accessed 21 Dec. 2019].

Wahid, A., Hasan, M., & Rabbani, A. (2015). The outreach-profitability tradeoff: Evidence from an ultra-poor program in Bangladesh. Dhaka, Bangladesh.

Yang, Z. (2006). A two-stage DEA model to evaluate the overall performance of Canadian life and health insurance companies. Mathematical and Computer Modelling, 43(7-8), 910-919.Available at:

Zaman, H. (1999). Assessing the impact of micro-credit on poverty and vulnerability in Bangladesh. 1. Retrieved from: .


Google Scholor ideas Microsoft Academic Search bing Google Scholor


Competing Interests:


Both authors contributed equally to the conception and design of the study.

Related Article

( 1 ) The Technical Efficiency of Collective Irrigation Schemes in South-Eastern of Tunisia
( 2 ) Comparative Analysis of Technical Efficiency of Milk Production Systems in Uasin Gishu County of Kenya
( 3 ) Measuring Efficiency in Banks: A Brief Survey on Non – Parametric Technique (Data Envelopment Analysis)
( 4 ) Estimating the Economic Determinants of Technical Efficiency of Bioenergy in EU-28: An Application of Tobit Analysis
( 5 ) Efficiency of Microfinance (MF) Institutions in Bangladesh: A Study on Top 10 MF Institutions
( 6 ) Determinants of Technical Efficiency of Hospitals in Kenya: 2012-2016
( 7 ) An Enquiry into the Contributions of Microfinance Institutions Towards the Development of Small Scale Business in Nigeria
( 8 ) Impact of Microfinance Lending On Economic Growth of Third world Nations: Study of Nigeria
( 10 ) What Explains the Overwhelmingly Positive Perception towards Microfinance Institutions? Application of Firth’s Logistic Regression in a Small Sample
( 13 ) The Correlation Between the Palestinian Civil Society Institutions and the Universities (Status: The Palestine Technical University Kadourie with Tulkarm Institutions)
( 14 ) Entrepreneurship Training for Mitigating Unemployment in Nigeria: How have the Tertiary Institutions Fared?
( 18 ) Factors Affecting the Capital Structure of the Textile Industry in Bangladesh: An Inferential Study
( 19 ) Contribution of Ready-Made Garments Industry on the Economic Development of Bangladesh: An Empirical Analysis
( 20 ) Study on Environment and Energy Using Belonging Materials
( 21 ) Kashmir Peasant Economy under Dogra’s: A Case Study of Agrarian Produce and Livestock 1885-1925 A.D
( 22 ) Driving Role of Institutional Investors in the Indian Stock Market in Short and Long-Run – An Empirical Study
( 23 ) Promoting Entrepreneurship through Open and Distance Education in Zimbabwe. A Case Study of the Zimbabwe Open University Students at Masvingo Regional Campus
( 24 ) Geographical Starting Points the Analysis of Current Rural Problems in Montenegro: Case Study of Rural Local Community Kralje
( 25 ) Study of the Relationship between Economic Growth and Inflation: Application to the Countries of the South Side of the Mediterranean: A Panel Data Approach
( 26 ) A Study of Transnational and Transformation Leadership Styles and Factors Affect The Leadership Style
( 28 ) The Recruitment of Migrant Workers in the Food Service Industry in Malaysia. A Study of Old Town White Coffee and Pappa Rich Kopitiam
( 29 ) Challenges and Survival Strategies for Women in Small Scale Catering Business: A Case Study of Siyaso Magaba, Mbare
( 30 ) A Mixed-Methods Study to Explore Stage of Readiness and Intention of Micro and Small Enterprises to Adopt Mobile Money in Indonesia
( 31 ) Attributes Influencing Strategic Alignment in the Service Sector: An Indonesian Banking Sector Case Study
( 32 ) Micro-Credits and Poverty Reduction in Dar-Es-Salaam, Tanzania: A Case Study of Dar-Es-Salaam Commercial Bank
( 33 ) An Assessment of the Impact of Information Communication Technology (ICT) On the Administration of Public Records: A Case Study of the Bolgatanga Municipal Assembly in the Upper East Region of Ghana-West Africa
( 34 ) The Mediating Effect of Market Orientation on the Relationship between Entrepreneurial Orientation Dimensions and Organizational Performance: A Study on Banks in Libya
( 35 ) Opinion of Parents about Child Labour and Their Education – A Study
( 36 ) Measuring the Quality of Islamic Banks Services and Its Impact on Customers Satisfaction A Survey Study on the Islamic Banks Customers in Lattakia-Syria
( 37 ) The Internal Branding Process: Customer Reprofiling and Brand Positioning (Empirical Study on Traditional Snack Food in Bandung-Indonesia)
( 38 ) Managerial Judgement Versus Financial Techniques in Strategic Investment Decisions: An Empirical Study on the Syrian Coastal Region Firms
( 39 ) Confirming the Mediation Effect of A Structural Model By Using Bootstrap Approach: A Case Study of Malaysian 8th Grade Students’ Mathematics Achievement
( 40 ) Studying the Integration of Damascus Securities Exchange with Selected Stock Markets
( 41 ) Market Share and Profitability Relationship: A Study of the Banking Sector in Nigeria
( 42 ) The Effect of Public Debt on Domestic Product and Unemployment (An Empirical Study on the Palestinian Economy)
( 43 ) A Theoretical Analysis Upon the Environmental Health and Justice Issue: A Case Study for a Comparison Between G20s Unitary and Federal Members
( 44 ) A Factor Analysis Approach Towards a Study of the Factors Affecting Students’ Choice of Higher Education Institution: A Case Study of a Private Institution (Twintech International University College of Technology)
( 45 ) Effects of Environmental Satisfaction on Family Displacement Case Study: Gohar Dasht Region, Karaj City
( 46 ) Measuring the Quality of Health Services in Lattakia Province Patients' Perspective (Field Study of Health Centers in Jableh City)
( 47 ) Rice Farmer and Capital Formation: A Case Study of Rice Farmer's Credit Cooperative in Itoikin, Ikosi-Ejirin LCDA, Lagos State
( 48 ) Internationalization of State Multilatinas: A Multi-Case Study in The Oil Sector
( 49 ) Effects of Corporate Social Responsibility on Banks Financial Performance in Nigeria: A Study of United Bank of Africa
( 50 ) A Case Study of Local Government Implementation of the Ward Based Local Economic Development (LED) Program
( 51 ) Under-Utilization of Female Capital: A Quantitative Study in Pakistani Perspective
( 52 ) Does Gold Price Lead or Lags Islamic Stock Market and Strategy Commodity Price? A Study from Malaysia
( 53 ) Investigate Airport Service Quality- A Case Study of Airports in Shanghai
( 54 ) The Impact of Organisational Culture on Public Sector Performance: A Case Study of Local Authorities in Zimbabwe
( 55 ) An Empirical Assessment of the Impact of Access to Credit on Farm Output: A Case Study of Sefwi-Wiawso Municipality Ghana
( 56 ) Determinants of Banks Profitability & Liquidity and the Role of BASEL III in Islamic & Conventional Banking Sector of Pakistan: A Case Study of NBP
( 57 ) Study on the Effect of Foreign Investment on Anhuis Industrial Structure Optimization
( 58 ) Rethinking Port Role as Transport Corridor under Symbiosis Theory-Case Study of China-Europe Trade Transportation
( 59 ) Analysis of Traffic Accident Occurrence at Hazardous Road Locations: A Case Study in Tunisia
( 61 ) The Effects of Macroeconomic Variables on Bank Default: A Case Study in Brazil
( 63 ) Corporate Social Responsibility Disclosure in Indonesia: A Bibliographic Study
( 64 ) Drivers Behind the Financial Insolvency: An Empirical Study on the Textile Industry in Bangladesh
( 65 ) Factors Influencing Audit Expense and Quality in an Emerging Economy: A Study on Bangladesh
( 66 ) Panel Data Estimators in the Presence of Serial and Spatial Correlation with Panel Heteroscedasticity: A Simulation Study
( 67 ) The Problem of Distribution of Food Products and their Influence on the Decision of Purchasing in the Consumer a Case Study of Milk Products in the South, Algeria
( 68 ) The Promise and Reality of Public Sector Reform – A Case Study of the Implementation of Trinidad and Tobagos Health Sector Reform
( 69 ) Impacts of Domestic Savings and Domestic Investment on Economic Growth: An Empirical Study for Pakistan
( 70 ) A Study on Financial Performance of Transport & Warehouses Firms Listed on the Hanoi Stock Exchange
( 71 ) Factors Influencing Profitability of Commercial Banks in Tanzania: A Case Study of CRDB Bank Plc
( 72 ) Testing the Validity of Arbitrage Pricing Theory: A Study on Dhaka Stock Exchange Bangladesh