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Borrower Targeting under Microfinance Competition with Motivated Microfinance Institutions and Strategic Complementarity

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  • Brishti Guha
  • Prabal Roy Chowdhury

Abstract

type="main"> We examine how increased competition among motivated microfinance institutions (MFIs) impacts the poorest borrowers' access to microfinance. We find that competition depends on inequality, technology, and the possibility of double-dipping (borrowing from several sources). Without competition, even a motivated MFI may lend to the not-so-poor in preference to poor borrowers. If double-dipping is feasible, competition may encourage lending to the poor. The presence of double-dipping is critical for MFI competition to have a positive effect. When double-dipping is feasible, MFI coordination may worsen borrower targeting whenever inequality is intermediate. We discuss policy implications dealing with double-dipping, MFI coordination, and competition.

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  • Brishti Guha & Prabal Roy Chowdhury, 2014. "Borrower Targeting under Microfinance Competition with Motivated Microfinance Institutions and Strategic Complementarity," The Developing Economies, Institute of Developing Economies, vol. 52(3), pages 211-240, September.
  • Handle: RePEc:bla:deveco:v:52:y:2014:i:3:p:211-240
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    File URL: http://hdl.handle.net/10.1111/deve.12047
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    References listed on IDEAS

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    Cited by:

    1. Chowdhury, Shyamal & Chowdhury, Prabal Roy & Sengupta, Kunal, 2014. "Sequential lending with dynamic joint liability in micro-finance," Journal of Development Economics, Elsevier, vol. 111(C), pages 167-180.

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