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Banks and microbanks

Author

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

Abstract

Using two new datasets, the authors examine whether the presence of banks affects the profitability and outreach of microfinance institutions. They find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks relying on commercial funding and using traditional bilateral lending contracts (rather than the group lending methods favored by microfinance nongovernmental organizations). The analysis considers plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment; but it fails to find strong support for these alternative hypotheses.

Suggested Citation

  • Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2009. "Banks and microbanks," Policy Research Working Paper Series 5078, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5078
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    More about this item

    Keywords

    Access to Finance; Debt Markets; Banks&Banking Reform; Microfinance; Economic Theory&Research;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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