Competition, performance and portfolio quality in microfinance markets

Ashim Kar (ashimkar11@gmail.com) and Ranjula Bali Swain

No 2014:8, Working Paper Series from Uppsala University, Department of Economics

Abstract: In recent years growing competition in the microfinance industry has been censured for multiple borrowing, default crises, high interest rates and coercive recovery of loans. Using the Boone indicator as a measure for competition, our paper investigates the impact of competition on microfinance institutions’ (MFIs) outreach, financial performance and quality of loan portfolio. We deal with the potential endogeneity issues by employing the instrumental variable approach using the generalized methods of moments (GMM) estimation technique. Analysing the Microfinance Information Exchange data our empirical results show that increased competition in microfinance sector leads to a larger average loans and a decrease in the financial self-sustainability. The data also supports the view that increased competition in the microfinance industry leads to a decline in the loan portfolio quality.

Keywords: microfinance institutions; competition; outreach; financial performance; capitalization; panel data IV estimation (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-10-31
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-fmk and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Competition, Performance and Portfolio Quality in Microfinance Markets (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:2014_008

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