Competition, performance and portfolio quality in microfinance markets

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2014:8

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: microfinance institutions ; competition ; outreach ; financial performance ; capitalization ; panel data IV estimation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kar, Ashim Kumar ; Swain, Ranjula Bali
• Event: Veröffentlichung
• (who): Uppsala University, Department of Economics
• (where): Uppsala
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/123797
• URN: urn:nbn:se:uu:diva-235539
• Last update: 10.03.2025, 11:42 AM CET