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Competition, performance and portfolio quality in microfinance markets
University of Helsinki, Helsinki, Finland.
Södertörn University, School of Social Sciences, Economics. Stockholm School of Economic.
2018 (English)In: European Journal of Development Research, ISSN 0957-8811, E-ISSN 1743-9728, Vol. 30, no 5, p. 842-870Article in journal (Refereed) Published
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. Vol. 30, no 5, p. 842-870
Keywords [en]
Microfinance, Competition, Boone indicator
National Category
Economics
Identifiers
URN: urn:nbn:se:sh:diva-34307DOI: 10.1057/s41287-018-0135-6Scopus ID: 2-s2.0-85044082488OAI: oai:DiVA.org:sh-34307DiVA, id: diva2:1176277
Available from: 2018-01-22 Created: 2018-01-22 Last updated: 2018-12-05Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • harvard-anglia-ruskin-university
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf