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How Rising Competition Among Microfinance Institutions Affects Incumbent Lenders

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Author Info

  • Craig McIntosh
  • Alain Janvry
  • Elisabeth Sadoulet

Abstract

This article uses data from Uganda's largest incumbent microfinance institution to analyse the impact of entry by competing lenders on client behaviour. We observe that rising competition does not lead to an increase in client dropout rate, but induces a decline in repayment performance and savings deposited with the incumbent, suggesting rising multiple loan-taking by clients. This joint effect on dropout and repayment is consistent with some negative information about clients and is being shared across lenders. However, the observed decline in repayment rates in a context of rising multiple loan-taking shows that information sharing about clients is far from complete. Copyright 2005 Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 115 (2005)
Issue (Month): 506 (October)
Pages: 987-1004

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Handle: RePEc:ecj:econjl:v:115:y:2005:i:506:p:987-1004

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Cited by:
  1. Brishti Guha & Prabal Roy Chowdhury, 2013. "Micro-finance Competition: Motivated Micro-lenders, Double-dipping and Default," Working Papers 01-2013, Singapore Management University, School of Economics.
  2. Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2009. "Banks and microbanks," Policy Research Working Paper Series 5078, The World Bank.
  3. KAI, Hisako, 2009. "Competition and Wide Outreach of Microfinance Institutions," MPRA Paper 17143, University Library of Munich, Germany.
  4. Paolo Casini, 2008. "Competition and Altruism in Microcredit Markets," Working Papers ECARES 2008_037, ULB -- Universite Libre de Bruxelles.
  5. Salim, Mir M., 2013. "Revealed objective functions of Microfinance Institutions: Evidence from Bangladesh," Journal of Development Economics, Elsevier, vol. 104(C), pages 34-55.
  6. Asalatha, B. P. & Vijayamohanan, Pillai N., 2010. "Raising the ‘Beatrice’s Goat’: The Indian Experience in Microcredit," MPRA Paper 29049, University Library of Munich, Germany.
  7. Aubert, Cécile & de Janvry, Alain & Sadoulet, Elisabeth, 2009. "Designing credit agent incentives to prevent mission drift in pro-poor microfinance institutions," Journal of Development Economics, Elsevier, vol. 90(1), pages 153-162, September.
  8. Bauernschuster, Stefan & Falck, Oliver & Große, Niels Daniel, 2013. "When trustors compete for the favour of a trustee - A laboratory experiment," Munich Reprints in Economics 20115, University of Munich, Department of Economics.
  9. Meesters, Aljar & Lensink, Robert & Hermes, Niels, 2008. "Outreach and Efficiency of Microfinance Institutions," Research Report 08002, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  10. Hisako Kai, 2009. "Competition and wide outreach of Microfinance Institutions," Economics Bulletin, AccessEcon, vol. 29(4), pages 2628-2639.
  11. Lehner, Maria, 2009. "Group Lending versus Individual Lending in Microfinance," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 299, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  12. Janda, Karel & Zetek, Pavel, 2014. "Survey of Microfinance Controversies and Challenges," MPRA Paper 56657, University Library of Munich, Germany.

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