Are microfinance markets monopolistic?
2017 (English)In: Applied Economics, ISSN 0003-6846, E-ISSN 1466-4283Article in journal (Refereed) Epub ahead of print
Do microfinance institutions (MFIs) operate in a monopoly, monopolistic competition environment or are their revenues derived under perfect competition markets? We employ the Panzar–Rosse revenue test on a global panel data to assess the competitive environment in which MFIs of five selected countries operate: Ecuador, India, Indonesia, Peru and Philippines, over the period 2005–2009. We estimate the static and the dynamic revenue tests, with analyses of the interest rate and the return on assets. We control for microfinance-specific variables such as capital-assets-ratio, loans-assets and the size of the MFI. The analyses also account for the endogeneity problem by employing the fixed-effects two-stage least squares and the fixed-effects system generalized method of moments. Our results suggest that MFIs in Peru and India operate in a monopolistic environment. We also find weak evidence that the microfinance industry in Ecuador, Indonesia and Philippines may operate under perfect competition.
Place, publisher, year, edition, pages
Microfinance, Competition, market structure, dynamic panel estimation, GMM estimation, Panzar-Rosse revenue tests
Social Sciences Economics
Research subject Other research area
IdentifiersURN: urn:nbn:se:sh:diva-32401DOI: 10.1080/00036846.2017.1310999OAI: oai:DiVA.org:sh-32401DiVA: diva2:1088818