Management Characteristics and Operational Efficiency of Cambodian and Philippine Microfinance Institutions: DEA and PCA

Principle Component Analysis

Among the Southeast Asian countries with a market economy and the multi-party political system, Cambodia and the Philippines have numerous well-developed microfinance institutions (MFIs). However, the business environments surrounding the MFIs differ considerably between these two countries. According to Amenomori (2010), Cambodian MFIs tend to have management characteristics emphasizing sustainable business operations, and several MFIs have grown and converted to commercial banks. On the other hand, the management objective of Philippine MFIs tends to focus on poverty reduction, and non-profit MFIs play a significant role in the Philippines.By applying the analytical methodology adopted in Gutierrez-Nieto (2007) and Yuzawa (2009) to the samples extracted from the MIX (Microfinance Information Exchange) database on MFIs in 2014, this study investigated the management characteristics and management efficiency of Cambodian and Philippine MFIs. Different from Yuzawa (2009) refuting the clear difference in management characteristics and efficiency between Cambodian and Philippine MFIs, this study found several differences between the two. First, Cambodian MFIs tended to target sustainability (profitability) oriented management, and Philippine MFIs tended to target outreach (financial service to the poor) oriented management. Secondly, the large sized MIFs tended to have higher overall efficiency than the small and medium sized MFIs in Cambodia, but this tendency was reversed in the Philippines. Thirdly, Cambodian MFIs used personnel expenses more intensively than other non-personnel expenses, but the tendency was reversed in the Philippines. These findings are consistent with the assertion claimed by Amenomori (2010).