EconPapers    
Economics at your fingertips  
 

The Impact of Microfinance Institutions on the Informal Credit Market: Evidence from Andhra Pradesh

Tiziana Venittelli ()
Additional contact information
Tiziana Venittelli: University of Naples Parthenope

The European Journal of Development Research, 2017, vol. 29, issue 2, 512-531

Abstract: Abstract This paper explores the reaction of informal lenders to the expansion of microfinance institutions (MFIs) in the rural credit market of Andhra Pradesh. Using an IV strategy to deal with endogeneity concerns, we document that an increase in MFI loans significantly raises the informal interest rate. Yet, we show that the effect of MFI expansion on the informal interest rate differs across villages according to the level of competition in the informal credit market, as measured by the landless share in the village. In particular, we find that the impact of microcredit supply is positive and significant in villages with low level of competition, but not significant in villages with high level of competition. We argue that in less competitive villages, increasing MFI loans generate detrimental consequences for the poorest, by worsening their informal credit market access conditions, while in more competitive villages, MFIs cannot subtract clients from moneylenders.

Keywords: microfinance; informal credit market; IV; G21; 012; 017 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1057/s41287-016-0014-y Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:eurjdr:v:29:y:2017:i:2:d:10.1057_s41287-016-0014-y

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/41287/PS2

Access Statistics for this article

The European Journal of Development Research is currently edited by Spencer Henson and Natalia Lorenzoni

More articles in The European Journal of Development Research from Palgrave Macmillan, European Association of Development Research and Training Institutes (EADI) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-04-09
Handle: RePEc:pal:eurjdr:v:29:y:2017:i:2:d:10.1057_s41287-016-0014-y