Practice What You Preach: Microfinance Business Models and Operational Efficiency

J.W.B. Bos*, M.M. Millone

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


The microfinance sector has room for pure for-profit microfinance institutions (MFIs), non-profit organizations, and “social” for-profit firms that aim to pursue a double bottom line. Depending on their business model, these institutions target different types of borrowers, change the size of their loans and adjust their loan pricing. We introduce a simple approach that accommodates a wide range of business models and allows us to estimate the operational efficiency of MFIs. Our empirical results show that MFIs with a high depth of outreach are most efficient, resulting in higher levels of outreach and profits for the same input mix.
Original languageEnglish
Pages (from-to)28-42
JournalWorld Development
Publication statusPublished - Jun 2015


  • microfinance
  • output distance function
  • outreach
  • efficiency
  • global


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