Factors enhancing efficiency of microfinance performance in agricultural communities of upper Northern Thailand

Efficient savings groups are envisioned to help in improving production capability and livelihoods of the local communities. The present study, thus, has the purposes to evaluate the operational efficiency of savings groups and identity determinants of performance efficiencies of 100 samples of savings groups operating in Chiang Mai and Chiang Rai provinces in the upper northern region of Thailand. Data Envelopment Analysis (DEA) method was employed for performance evaluation and the study found the mean efficiency score of all samples to be 0.464. The Tobit regression model application provided the results that the variables having positive relationships at statistically significant level with the operational efficiency of the savings groups were the number of group members, net profit as percentage of total assets, net profit as percentage of share capital, average loan size per member, share capital to total lending ratio, and the financial management capability of the organizational committee; while the deposit-taking to total lending ratio had negative relationship with the performance at statistically significant level. These findings suggest that membership enlargement is imperative for enhancing the efficiency of savings groups due to the economy of scale. It is also recommended that government agencies or public sector entities, in their supports to foster the savings groups operation, place emphasis on providing training on management and administration for the group committee members rather than subsidy.