Banks and microbanks

Robert Cull (), Asli Demirguc-Kunt and Jonathan Morduch ()

No 5078, Policy Research Working Paper Series from The World Bank

Abstract: Using two new datasets, the authors examine whether the presence of banks affects the profitability and outreach of microfinance institutions. They find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks relying on commercial funding and using traditional bilateral lending contracts (rather than the group lending methods favored by microfinance nongovernmental organizations). The analysis considers plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment; but it fails to find strong support for these alternative hypotheses.

Keywords: Access to Finance; Debt Markets; Banks&Banking Reform; Microfinance; Economic Theory&Research (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-mfd and nep-reg
Date: 2009-10-01

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