Management Characteristics of Cambodian Microfinance Institutions: Operational Efficiency and Management Objectives

It is difficult to decide how to measure the efficiency of microfinance institutions' management. This is because, different from other profit maximizing financial institutions, an essential management characteristic of microfinance institutions involves working toward greater access for the poor. This paper seeks to describe the characteristics and efficiency of the management of microfinance institutions in Cambodia, in terms of microfinance institutions' specific objective of expanding access to the poor, by using the analytical methodology described in the work of Gutierrez-Nieto et al. (2007), with respect to microfinance institutions in Latin America. The analysis was conducted in two steps: in Step 1, the operating efficiency indices of major microfinance institutions were measured, by conducting a Data Envelopment Analysis (DEA) using data from the National Bank of Cambodia's annual publications. Next, in Step 2, a principal component analysis was conducted using the efficiency indices measured in Step 1, and the management characteristics of each microfinance institution were analyzed. According to the results of our analyses, although great diversity exists among microfinance institutions in Cambodia, (1) large-scale microfinance institutions exhibit higher overall efficiency, (2) approximately one-third of microfinance institutions are oriented towards access for the poor, and (3) access-oriented institutions also exhibiting high overall efficiency comprised less than one-fifth of all microfinance institutions. These results suggest a need for policy that promotes expanding the scale of microfinance institutions, while simultaneously maintaining their orientation toward access for the poor.