Refinancing MFIs with market power: theory and evidence

Lutz G. Arnold (), Benedikt Booker, Gregor Dorfleitner and Michaela Röhe
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Lutz G. Arnold: University of Regensburg
Benedikt Booker: University of Regensburg
Gregor Dorfleitner: University of Regensburg
Michaela Röhe: University of Regensburg

Small Business Economics, 2021, vol. 56, issue 4, No 12, 1485-1505

Abstract: Abstract Microfinance investment vehicles (MIVs) play an increasingly important role as a source of funding for microfinance institutions (MFIs). This paper presents theory and evidence on the relation between the use of MIV capital and MFI market power. We present a model in which MIVs are social-minded in that they do not lend to MFIs which exploit their market power in the market for microcredit. Consistent with the theoretical model, we find empirically that measures of MFI market power are negatively related to the likelihood of using MIV capital. This suggests that MIVs play an effective role in promoting social objectives in microfinance.

Keywords: Small enterprises; Microfinance; Microfinance investment vehicles; Social returns; G21; L26 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11187-019-00252-8

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