The Efficiency of Microfinance in Vietnam: Evidence from NGO Schemes in the North and the Central Regions

Hong Son Nghiem,
Prof Tim Coelli,
Prof Prasada Rao
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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 so-called “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.

Keywords: Microfinance, Efficiency, Vietnam
Stream: Economic Sustainability, Social Sustainability
Presentation Type: Virtual Presentation in English
Paper: Efficiency of Microfinance in Vietnam, The

Hong Son Nghiem

PhD Canidate, School of Economics, The University of Queensland

My name is Hong Son Nghiem. I am a PhD candidate at School of Economics, the University of Queensland, Australia. In this paper, I am investigating the efficiency of microfinance services in Vietnam with evidence from NGO programs in the north and central regions. The purpose of this paper is to contribute to the improvement of the young and rapid growing microfinance industry in Vietnam. I have five years experience of empirical research in rural development in Vietnam. I also worked as an economist in the government sector for four years. My interest include research on development economics, efficiency and productivity analysis.

Prof Tim Coelli

School of Economics,, University of Queensland

Professor Coelli specialises in theoretical and applied econometrics, production economics and performance measurement. Research interests include: efficiency and productivity measurement, involving the use of econometric methods in production economics, such as stochastic frontier production and cost functions, dual systems, index numbers and data envelopment analysis (DEA). He has written computer software (in Fortran) which can estimate some of these models. The majority of applied research has involved either developing country agriculture or public sector organisations, with a recent focus on performance measurement for use in the regulation of infrastructure industries. This has involved consultancy work for the World Bank, the Independent Pricing Regulatory Tribunal of NSW, the Water Services Association of Australia and the Queensland Water Reform Unit. Currently holds editorial appointments with the Journal of Productivity Analysis and Agricultural Economics.

Prof Prasada Rao

Director, Centre for Efficiency and Productivity
Analysis (CEPA), School of Economics, University of Queensland


Professor Rao specialises in theory and application of index numbers with special focus on international comparisons and productivity measurement. Research interests include: efficiency and productivity measurement; international comparisons of prices, output and productivity; purchasing power parities; inequality and poverty measurement; and applied econometrics; In addition to his methodological contributions, he has undertaken several large-scale empirical studies including a global agricultural comparison project involving a large number of countries, for the Statistics Division of the Food and Agriculture Organisation. He has also undertaken a major empirical study measuring Australia's Competitiveness as a Tourist Destination. He is currently very actively involved in the 2003 Round of the International Comparison Program and the Measurement of Purchasing Power Parities for Global Poverty Measurement. He was elected to the Fellowship of the Academy of Social Sciences of Australia
in 1997 and he is an elected member of the International Statistical Institute.

Ref: S06P0354