While economies of scope of lending and mobilizing deposits in banking are justified theoretically (Diamond, 1984) and found empirically (see Saunders, 1999), in microfinance, the existence and the magnitudes of scope economies has not been investigated. We use a semi parametric smooth coefficient model to estimate these economies using the largest publicly available dataset of over 2,800 annual observations from MFIs across the world. We accommodate the outreach objective of Microfinance Institutions (MFIs) by measuring outputs as the number of clients (borrowers and savers) rather than the traditional volume of loans and deposits and compare the results from the two cost functions. We find substantial scope economies of 47 percent on average. The results... |