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Microfinance tradeoffs : regulation, competition, and financing

Author

Listed:
  • Cull, Robert
  • Demirguc-Kunt, Asli
  • Morduch, Jonathan

Abstract

This 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.

Suggested Citation

  • Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2009. "Microfinance tradeoffs : regulation, competition, and financing," Policy Research Working Paper Series 5086, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5086
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    Cited by:

    1. Gallego-Losada, María-Jesús & Montero-Navarro, Antonio & García-Abajo, Elisa & Gallego-Losada, Rocío, 2023. "Digital financial inclusion. Visualizing the academic literature," Research in International Business and Finance, Elsevier, vol. 64(C).
    2. Li, Lin Yang & Hermes, Niels & Meesters, Aljar, 2019. "Convergence of the performance of microfinance institutions: A decomposition analysis," Economic Modelling, Elsevier, vol. 81(C), pages 308-324.
    3. Kyriazopoulos Georgios, 2019. "Financial Evaluation and Efficiency of Microfinance Institutions: A cross-country analysis," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(6), pages 1-1.
    4. Sandra, Kendo & Chicot, Eboue, 2016. "Microfinance institutional growth: How driven forces impact their financial integration?," MPRA Paper 70225, University Library of Munich, Germany.
    5. Ponce, L. Arturo Bernal & Rocha, Adriana Ramírez & Navarro, Ricardo Pérez, 2021. "A causality approach in the analysis of the trade-off between financial sustainability and outreach," Finance Research Letters, Elsevier, vol. 42(C).

    More about this item

    Keywords

    Access to Finance; Debt Markets; Banks&Banking Reform; Emerging Markets; Rural Finance;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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