How Rising Competition Among Microfinance Lenders Affects Incumbent Village Banks
AbstractThis paper uses data from Ugandaâ€™s largest incumbent microfinance institution to analyze the impact of entry by competing lenders on client behavior. We first examine the geographic placement decisions of competitors, and find that placement decisions are strongly affected by district-level characteristics. We observe that increased competition induces a decline in repayment performance and in savings deposited with the incumbent Village Bank, suggesting multiple loan-taking by clients. Urban clients take multiple loans primarily from lenders with more individual methodologies, while rural clients borrow from several group lenders. Individuals who operate larger businesses are the ones most likely to leave the incumbent Village Bank when a Solidarity Group lender enters the marketplace.
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Bibliographic InfoPaper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt0zg6t3sv.
Date of creation: 01 Jun 2003
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microfinance; competition; credit markets;
Other versions of this item:
- McIntosh, Craig & de Janvry, Alain & Sadoulet, Elisabeth, 2003. "How rising competition among microfinance lenders affects incumbent village banks," CUDARE Working Paper Series 987, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
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