A major debate in microfinance focuses on the existence of a trade-off between the
financial sustainability of microfinance institutions (MFIs) and their outreach to
poor clients. This paper adds to this debate by analyzing whether financial and
social efficiency are mutually exclusive in a context of implicit subsidies by the
state and international donors. We use data from a sample of 28 Vietnamese MFIs
and apply Data Envelopment Analysis (DEA) to identify the existence of a tradeoff.
Our analysis shows that for Vietnamese MFIs financial and social efficiency
are not related. We interpret this as evidence for the fact that there is no support to
believe that there is such a trade-off. Subsidies, based on which most Vietnamese
MFIs currently operate, helps them to show high financial efficiency, while at the
same time being able to attain their social goals. Nevertheless, this model may not
be sustainable in the long-term