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2169-026X

Journal of Entrepreneurship & Organization Management
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Research Article

Learning Curve Spillovers and Transactions Cost in the Microfinance Industry of the Philippines

Jovi Dacanay C*

School of Economics, University of Asia, The Pacific Pearl Drive Corner St. Josemaria Escriva Drive Ortigas Center (1605), Pasig City, Philippines

*Corresponding Author:
Jovi Dacanay C
Economist, School of Economics, University of Asia
The Pacific Pearl Drive Corner St. Josemaria
Escriva Drive Ortigas Center (1605)
Pasig City, Philippines
Tel: 6326370912
E-mail: [email protected]

Received Date: August 13, 2015; Accepted Date: September 19, 2015; Published Date: October 08, 2015

Citation: Jovi Dacanay C (2015) Learning Curve Spillovers and Transactions Cost in the Microfinance Industry of the Philippines. J Entrepren Organiz Manag 4:149. doi:10.4172/2169-026X.1000149

Copyright: © 2015 Jovi Dacanay C. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Abstract

Microfinance institutions (MFIs) in the Philippines have gained a reputation for operating as a for-profit institution
reaching the poor through micro-lending. The problem or issue which the study addresses is to determine how MFIs
in the Philippines are able to attain operational self-sufficiency, the established indicator for financial viability among
microfinance institutions, in spite of high transactions cost. The phenomenon may be verified by the following research
question: does the behavior of operational and transactions costs among group and individual microfinance lenders
manifest experience or learning curve spillovers and a U-shaped supply curve? The study has two objectives. First,
using appropriate measures of financial and social performance, the study shall empirically verify the phenomenon of
experience or learning curve spillovers among MFIs. Second is to estimate the supply curve for loans to the unbanked
poor and verify that it is U-shaped.
The results of the pooled least squares with cross-section random effects regression estimation show that both
NGOs and rural banks are attaining both objectives of operational self-sufficiency and moderate to good social
performance, through the spillover effects of learning, that is, fast learning for rural banks and moderate learning for
NGOs. Operational and transactions costs are high but decreasing for both rural banks and NGOs. Older, more mature
NGOs and rural banks are able to set transactions cost at the prescribed level of 11%-25%. Such costs ensure that the
MFIs operate in order to both financial performance and outreach.

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