Competition and Wide Outreach of Microfinance Institutions
AbstractWhile the theoretical literature has found that intense competition leads to the poorest borrowers dropping out of the microfinance market, we do not possess sufficient research accumulated for empirical analysis in this field. This paper examines the empirical relationship between competition and wide outreach—which measures how poor-borrower microfinance institutions (MFIs) provide loans—and its accompanying effect, the impact of competition on financial self-sufficiency (FSS), using abundant financial data for socially-motivated MFIs between 2003 and 2006. We provide the first detailed econometric analysis in this regard focusing on socially-motivated MFIs in developing countries around the world. This paper finds that intense competition worsens the wide outreach, showing that the poorest borrowers are dropped from the microfinance lending portfolio. Moreover, the empirical result indicates that the adverse effect of competition on wide outreach declines as MFIs gain experience. Furthermore, this paper confirms that competition does not worsen financial self-sufficiency (FSS) and hence does not raise subsidy dependence.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 17143.
Date of creation: 07 Sep 2009
Date of revision:
Competition; Wide Outreach; Microfinance Institutions;
Find related papers by JEL classification:
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-11 (All new papers)
- NEP-MFD-2009-09-11 (Microfinance)
- NEP-MIC-2009-09-11 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shahidur R. Khandker, 2005.
"Microfinance and Poverty: Evidence Using Panel Data from Bangladesh,"
World Bank Economic Review,
World Bank Group, vol. 19(2), pages 263-286.
- Khandker, Shahidur R., 2003. "Microfinance and poverty - evidence using panel data from Bangladesh," Policy Research Working Paper Series 2945, The World Bank.
- Craig McIntosh & Alain Janvry & Elisabeth Sadoulet, 2005. "How Rising Competition Among Microfinance Institutions Affects Incumbent Lenders," Economic Journal, Royal Economic Society, vol. 115(506), pages 987-1004, October.
- McIntosh, Craig & Wydick, Bruce, 2005. "Competition and microfinance," Journal of Development Economics, Elsevier, vol. 78(2), pages 271-298, December.
- Hoff, Karla & Stiglitz, Joseph E., 1997.
"Moneylenders and bankers: price-increasing subsidies in a monopolistically competitive market,"
Journal of Development Economics,
Elsevier, vol. 52(2), pages 429-462, April.
- Hoff, Karla & Stiglitz, Joseph E., 1998. "Moneylenders and bankers: price-increasing subsidies in a monopolistically competitive market," Journal of Development Economics, Elsevier, vol. 55(2), pages 485-518, April.
- Robert M. Townsend & Jacob Yaron, 2001. "The credit risk-contingency system of an Asian development bank," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 31-48.
- Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2006.
"Financial performance and outreach : a global analysis of leading microbanks,"
Policy Research Working Paper Series
3827, The World Bank.
- Robert Cull & Asli Demirguç-Kunt & Jonathan Morduch, 2007. "Financial performance and outreach: a global analysis of leading microbanks," Economic Journal, Royal Economic Society, vol. 117(517), pages F107-F133, 02.
- Morduch, Jonathan, 1999. "The role of subsidies in microfinance: evidence from the Grameen Bank," Journal of Development Economics, Elsevier, vol. 60(1), pages 229-248, October.
- Conning, Jonathan, 1999. "Outreach, sustainability and leverage in monitored and peer-monitored lending," Journal of Development Economics, Elsevier, vol. 60(1), pages 51-77, October.
- Louis, Philippe & Seret, Alex & Baesens, Bart, 2013. "Financial Efficiency and Social Impact of Microfinance Institutions Using Self-Organizing Maps," World Development, Elsevier, vol. 46(C), pages 197-210.
- Brishti Guha & Prabal Roy Chowdhury, 2012. "Borrower Targeting under Micro-finance Competition with Motivated MFIs," Working Papers 05-2012, Singapore Management University, School of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.