Microfinance in Vietnam

Abstract

A large amount of donor money and government money is spent on microfinance programs in developing countries around the world. However, there is very little quantitative research available on the relative efficiency of these programs. This research investigates the efficiency of the microfinance industry in Vietnam through a survey of 46 schemes in the north and the central regions. Data Envelopment Analysis (DEA) methods are used to assess the technical efficiency and scale efficiency of the microfinance schemes. Given the lack of previous studies in this industry, we review the various approaches to variable selection used in the financial institutions literature and amend the socalled "production" approach to accommodate the poverty reduction focus of microfinance. The empirical results reveal that the average technical efficiency scores of schemes surveyed is 80%. A second stage regression analysis is used to assess the impact of a variety of environmental variables upon the efficiency of the schemes. The age and the location of the scheme are found to have a significant influence upon efficiency.