Productivity Change of Microfinance Institutions in Bosnia and Herzegovina

Abstract The main aim of this paper is to investigate the productivity changes of microfinance institutions (MFIs) in Bosnia and Herzegovina (BiH) during and after the recent financial crisis. The study covers the period starting from 2008 until 2015. Using the Malmquist Productivity Index (MPI) over the sample of 10 MFIs and a balanced panel dataset of 80 observations, this study explores technical and technological change as well as total factor productivity (TFP) change. The empirical findings indicate a decline in TFP in most of the analyzed periods with an average decrease of 2.5%. The study reveals an average technological decline in the industry of 1.7%, while technical efficiency change is recorded at the level of -0.8%. Overall, crisis efficiency recovery occurred during the period between 2009 and 2013. However, due to technological inefficiencies, average total factor productivity change remains negative. Hence, policy makers need to enhance the technological progress in order to meet their strategic objectives in BiH MFIs.