Efficiency of Microfinancial Institutions in Egypt.

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Microfinance is a vigorous poverty alleviation tool that involves the supply of financial services; credit, savings and insurance to the poor. Given that MFIs have a social and a financial objective, the usual tools used to measure the efficiency of traditional banks are not appropriate, while DEA proved to be a very powerful technique. In Egypt, credit has been the primary type of microfinance product and has been predominantly offered through NGOs. The objective of this paper is to investigate, utilizing DEA, the technical efficiency of such NGOs-MFIs. We used Mix Market dataset to get data for 14 Egyptian NGOs-MFIs for the period 2000-2012. The results show that many NGOs-MFIs worked on the efficiency frontier. The average technical efficiency scores have decreased after 2008 and more so after the January revolution. This is due to the relatively greater reduction in outputs as opposed to inputs. The fall in loan portfolios and borrowers (outputs) is most likely attributable to the halt status that most MFIs put on loan provision right after the revolution. The decline in number of personnel (input) is most likely due to the lack of funds and training that might have caused layoffs and the prevalent political instability.