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Market Structure and Borrower Welfare in Micro Finance

  • Ghatak, Maitreesh

    (London School of Economics)

  • de Quidt, Jonathan

    (London School of Economics)

  • Fetzer, Thiemo

    (London School of Economics)

Motivated by recent controversies surrounding the role of commercial lenders in micro finance, we analyze borrower welfare under different market structures, considering a benevolent non-profit lender, a for-prfi t monopolist, and a competitive credit market. To understand the magnitude of the effects analyzed, we simulate the model with parameters estimated from the MIX Market database. Our results suggest that market power can have severe implications for borrower welfare, while despite possible information frictions competition typically delivers similar borrower welfare to non-pro t lending. In addition, for-profit lenders are less likely to use joint liability than non-profits.

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Paper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 123.

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Date of creation: 2013
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Handle: RePEc:cge:wacage:123
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