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Technical efficiency of the Italian Mutual guarantee institutions

Domenico Piatti, Peter Cincinelli, Università di Bergamo
February 2019 - n. 2
Keywords: Credit guarantee, Stochastic Frontier, cost efficiency, collateral
Jel codes: G21, G30

Cost efficiency is a peculiar element for the Mutual Guarantee Institutions (Confidi) core business. Efficient resource management is the condition that can enable a future development of the collaterals market. Adopting the stochastic frontier approach to a sample of Italian Confidi, the paper has a twofold objective: measure the level of cost efficiency and its determinants variables. The results show that Confidi disperse resources by about 15-20%, and thus could produce the same output, saving 15-20% of the inputs, even if there are very diversified situations and over time there is a general improvement. Credit risk represents a significant driver of inefficiency, while the capitalization, size and contributions improve cost efficiency. Further improvements related to a revision and/or reorganization of processes and business models of Confidi ought to be considered.

 

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