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Effect of non-structural competition on the performance of microfinance institutions in sub-Saharan Africa

Author

Listed:
  • Prince Hikouatcha

    (University of Dschang)

  • Thierry Djatang

    (University of Dschang)

  • Henri Njangang

    (University of Dschang)

  • Joseph Nzongang

    (University of Dschang)

Abstract

This article investigates the impact of non-structural competition on the double bottom line of microfinance institutions (MFIs). The information used is from 137 MFIs, in 18 sub-Saharan African (SSA) countries, from 2005 to 2018. The empirical strategy is based on the Generalized System Moment Method. The results provided strong evidence that there is a nonlinear relationship between non-structural competition and financial sustainability. Additionally, more competition leads to a decrease in the social performance of microfinance, and this is, on the one hand, linear with the social outreach depth and, on the other hand, non-linear with social awareness. These results are also broadly robust to whether the MFI is for-profit or not, to the financial crisis, and to the effects of economic and financial development. For-profit oriented MFIs should therefore only admit an acceptable level of competition, while socially oriented MFIs should be wary of it, especially when it comes to improving their social depth as opposed to their social breadth.

Suggested Citation

  • Prince Hikouatcha & Thierry Djatang & Henri Njangang & Joseph Nzongang, 2023. "Effect of non-structural competition on the performance of microfinance institutions in sub-Saharan Africa," SN Business & Economics, Springer, vol. 3(11), pages 1-23, November.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:11:d:10.1007_s43546-023-00583-5
    DOI: 10.1007/s43546-023-00583-5
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