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Microfinance tradeoffs : regulation, competition, and financing

Author

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

Abstract

This paper describes important trade-offs that microfinance practitioners, donors, and regulators navigate. Drawing evidence from large, global surveys of microfinance institutions, the authors find a basic tension between meeting social goals and maximizing financial performance. For example, non-profit microfinance institutions make far smaller loans on average and serve more women as a fraction of customers than do commercialized microfinance banks, but their costs per dollar lent are also much higher. Potential trade-offs therefore arise when selecting contracting mechanisms, level of commercialization, rigor of regulation, and the extent of competition. Meaningful interventions in microfinance will require making deliberate choices - and thus embracing and weighing tradeoffs carefully.

Suggested Citation

  • Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2009. "Microfinance tradeoffs : regulation, competition, and financing," Policy Research Working Paper Series 5086, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5086
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    Cited by:

    1. Sandra, Kendo & Chicot, Eboue, 2016. "Microfinance institutional growth: How driven forces impact their financial integration?," MPRA Paper 70225, University Library of Munich, Germany.

    More about this item

    Keywords

    Access to Finance; Debt Markets; Banks&Banking Reform; Emerging Markets; Rural Finance;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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