Borrower Targeting under Microfinance Competition with Motivated Microfinance Institutions and Strategic Complementarity

Brishti Guha () and Prabal Roy Chowdhury ()

The Developing Economies, 2014, vol. 52, issue 3, 211-240

Abstract: type="main">

We examine how increased competition among motivated microfinance institutions (MFIs) impacts the poorest borrowers' access to microfinance. We find that competition depends on inequality, technology, and the possibility of double-dipping (borrowing from several sources). Without competition, even a motivated MFI may lend to the not-so-poor in preference to poor borrowers. If double-dipping is feasible, competition may encourage lending to the poor. The presence of double-dipping is critical for MFI competition to have a positive effect. When double-dipping is feasible, MFI coordination may worsen borrower targeting whenever inequality is intermediate. We discuss policy implications dealing with double-dipping, MFI coordination, and competition.

Date: 2014
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