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Competition and the performance of microfinance institutions

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  • Esubalew Assefa
  • Niels Hermes
  • Aljar Meesters

Abstract

This article examines the relationship between competition and the performance of Microfinance Institutions (MFIs). We measure competition by constructing a Lerner index. Next, we assess the association between increased competition among MFIs on the one hand and outreach and loan repayment performance of individual MFIs on the other. The empirical investigation is based on data from 362 MFIs in 73 countries for the period 1995--2008. Based on our analysis we do find a general trend of increased competition in microfinance during the last decade. Moreover, our econometric analysis provides evidence that competition among MFIs is negatively associated with their outreach and repayment performance.

Suggested Citation

  • Esubalew Assefa & Niels Hermes & Aljar Meesters, 2013. "Competition and the performance of microfinance institutions," Applied Financial Economics, Taylor & Francis Journals, vol. 23(9), pages 767-782, May.
  • Handle: RePEc:taf:apfiec:v:23:y:2013:i:9:p:767-782
    DOI: 10.1080/09603107.2012.754541
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    References listed on IDEAS

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    1. Oliver Vins & Michael Koetter, 2008. "The Quiet Life Hypothesis in Banking - Evidence from German Savings Banks," Working Paper Series: Finance and Accounting 190, Department of Finance, Goethe University Frankfurt am Main.
    2. repec:idb:brikps:46838 is not listed on IDEAS
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