Microfinance tradeoffs : regulation, competition, and financing
AbstractThis paper describes important trade-offs that microfinance practitioners, donors, and regulators navigate. Drawing evidence from large, global surveys of microfinance institutions, the authors find a basic tension between meeting social goals and maximizing financial performance. For example, non-profit microfinance institutions make far smaller loans on average and serve more women as a fraction of customers than do commercialized microfinance banks, but their costs per dollar lent are also much higher. Potential trade-offs therefore arise when selecting contracting mechanisms, level of commercialization, rigor of regulation, and the extent of competition. Meaningful interventions in microfinance will require making deliberate choices - and thus embracing and weighing tradeoffs carefully.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 5086.
Date of creation: 01 Oct 2009
Date of revision:
Access to Finance; Debt Markets; Banks&Banking Reform; Emerging Markets; Rural Finance;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-07 (All new papers)
- NEP-CFN-2009-11-07 (Corporate Finance)
- NEP-DEV-2009-11-07 (Development)
- NEP-MFD-2009-11-07 (Microfinance)
- NEP-MIC-2009-11-07 (Microeconomics)
- NEP-REG-2009-11-07 (Regulation)
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