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Abstract
This dissertation evaluates the efficiency of microfinance institutions (MFIs) in China relative to other Chinese agricultural lending institutions and the more established Indian MFIs. Microfinance institutions provide financial services to the low income population as a partial solution to capital shortages among poor households. In comparing Chinese MFIs and agricultural lending institutions, the Input Distance function was employed to evaluate of the technical efficiency and allocative efficiency from the input aspect while Data Envelopment Analysis techniques were used to further decompose the technical efficiency into pure technical efficiency and scale efficiency. This research also compared the technical efficiency of Chinese microfinance institutions with the more established Indian microfinance institutions and identified the different factors significantly affecting the efficiency of microfinance institutions in these two countries. The results indicate that there is no significant difference between Chinese commercial banks and microfinance institutions in terms of technical efficiency while Chinese commercial banks achieved higher level of allocative efficiency than microfinance institutions. After further decomposing technical efficiency into pure technical efficiency and scale efficiency and comparing with more established Indian microfinance institutions, the results show that overall Chinese microfinance institutions have lower level of technical efficiency, pure technical efficiency, and scale efficiency than Indian microfinance institutions. The results also indicate that the efficiencies of Chinese and Indian microfinance institutions are influenced by different sets of factors that define these institutions differing operating goals.