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Competition, performance and portfolio quality in microfinance markets
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2018 (English)In: European Journal of Development Research, ISSN 0957-8811, E-ISSN 1743-9728Article in journal (Refereed) Accepted
Abstract [en]

Growing competition in microfinance has been blamed for multiple borrowing, over-indebtedness and loan repayment crisis in recent times. Using the Boone indicator as a proxy for competition, we investigate how competition impacts microfinance institutions’ (MFIs’) outreach, financial performance and quality of loan portfolio in this paper. The analysis is based on data from 568 MFIs in 10 vibrant microfinance markets (Bangladesh, Bolivia, Ecuador, India, Indonesia, Mexico, Nepal, Nicaragua, Peru and Philippines) for the period 2003-2014. We control for potential endogeneity of MFI performance, competition and other covariates by employing the generalized methods of moments (GMM) estimation technique. We find that increased competition leads to higher profitability and better loan portfolio quality of the sampled MFIs, but worsens depth of outreach to the poor, which is an indication of mission drift.   

Place, publisher, year, edition, pages
2018.
Keywords [en]
Microfinance, competition, Boone indicator
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-339612OAI: oai:DiVA.org:uu-339612DiVA, id: diva2:1176278
Available from: 2018-01-22 Created: 2018-01-22 Last updated: 2018-01-22

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CiteExportLink to record
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