Competition, Loan Rates and Information Dispersion in Microcredit Markets
LSF Working Paper Series No. 11-17
61 Pages Posted: 18 Feb 2012 Last revised: 14 Jul 2014
Date Written: July 26, 2012
Abstract
We study the effects of competition on loan rates and loan portfolio quality in microcredit markets using a new database from rating agencies, covering 379 for-profit and nonprofit microfinance institutions (MFIs) in 67 countries over 2002-2008. First, we find competitive pressures from increased market share of for-profits. Second, we find that nonprofits are relatively insensitive to concentration changes, while they appear to sustain their competitive advantage stemming from proprietary information on borrowers. In contrast, for-profits charge significantly lower rates and exhibit improved portfolio quality in less concentrated markets. We show that this effect is consistent with an information dispersion mechanism.
Keywords: Loan rates, bank competition, microfinance, information dispersion, portfolio quality, nonprofit institutions
JEL Classification: D4, G21, L1, O1
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Microfinance Institutions and Public Policy
By Daniel Hardy, Paul Holden Holden, ...
-
Outreach and Efficiency of Microfinance Institutions
By Niels Hermes, Robert Lensink, ...
-
Performance and Corporate Governance in Microfinance Institutions
By Roy Mersland and R. Øystein Strøm
-
Financial Development and the Efficiency of Microfinance Institutions
By Niels Hermes, Robert Lensink, ...
-
The Cost of Ownership in Microfinance Organizations
By Roy Mersland
-
Does Regulatory Supervision Curtail Microfinance Profitability and Outreach?
By Robert Cull, Asli Demirgüç-kunt, ...
-
By Beatriz Armendariz and Marc Labie
-
Microfinance Tradeoffs: Regulation, Competition, and Financing
By Robert Cull, Asli Demirgüç-kunt, ...
-
Does Microfinance Regulation Curtail Profitability and Outreach?
By Robert Cull, Asli Demirgüç-kunt, ...