Technology gaps, social outreach and financial sustainability of South Asian MFIs: bootstrap DEA meta-frontier approach

The Microfinance Institutions (MFIs) operate to achieve twin objectives: financial and social. South Asian MFIs have a major industry share in terms of clients and loan portfolios. However, the operating environment in terms of culture, legalities, technology, regulations, and funding is heterogeneous. Additionally, the diverse environment also affects the MFIs' performance in different ways. Therefore, the objective of this paper is to examine the dual goals (financial and social) of MFIs operating in South Asia. The authors incorporate bootstrap data envelopment analysis to measure bias-corrected efficiency scores. Additionally, to account for technological heterogeneity, we have opted for a meta-frontier approach. The authors also estimated the technology gap ratios and relative inefficiencies of individual MFIs. Our analysis is based on 2258 observations of MFIs operating during the years 2005 to 2018 in India, Bangladesh, Nepal, and Pakistan. Our results confirm that MFIs in the South Asian constituency are inclined towards financial goals rather than social outreach. Moreover, managerial inefficiency is the main cause of the lower level of performance in the selected region. Therefore, MFIs need to allocate resources efficiently and adopt the latest technology to further enhance social as well as financial performance levels.