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Competition, Loan Rates and Information Dispersion in Microcredit Markets

  • Andréas Heinen
  • Malika Hamadi
  • Guillermo Baquero

We describe the competitive environment of microcredit markets globally and we study the effects of competition on loan rates of microfinance institutions (MFIs). We use a new database from rating agencies, covering 379 for-profit and nonprofit MFIs in 67 countries over 2002-2008. First, we find that nonprofits are relatively insensitive to concentration changes, while for-profits charge significantly lower rates in less concentrated markets. We control for interest rate ceilings and other country-specific factors. Second, we find competitive pressures on nonprofits from increased for-profit market share. Third, we show that the effects of concentration are consistent with an information dispersion mechanism.

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Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 201314.

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Date of creation: 2013
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Handle: RePEc:cns:cnscwp:201314
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