Microfinance Tradeoffs: Regulation, Competition, and Financing

21 Pages Posted: 20 Apr 2016

See all articles by Robert Cull

Robert Cull

World Bank - Development Research Group (DECRG)

Asli Demirgüç-Kunt

World Bank

Jonathan Morduch

New York University (NYU) - Robert F. Wagner Graduate School of Public Service; New York University (NYU) - Department of Economics

Date Written: October 1, 2009

Abstract

This paper describes important trade-offs that microfinance practitioners, donors, and regulators navigate. Drawing evidence from large, global surveys of microfinance institutions, the authors find a basic tension between meeting social goals and maximizing financial performance. For example, non-profit microfinance institutions make far smaller loans on average and serve more women as a fraction of customers than do commercialized microfinance banks, but their costs per dollar lent are also much higher. Potential trade-offs therefore arise when selecting contracting mechanisms, level of commercialization, rigor of regulation, and the extent of competition. Meaningful interventions in microfinance will require making deliberate choices - and thus embracing and weighing tradeoffs carefully.

Keywords: Access to Finance, Debt Markets, Banks & Banking Reform, Emerging Markets, Rural Finance

Suggested Citation

Cull, Robert and Demirgüç-Kunt, Asli and Morduch, Jonathan, Microfinance Tradeoffs: Regulation, Competition, and Financing (October 1, 2009). World Bank Policy Research Working Paper No. 5086, Available at SSRN: https://ssrn.com/abstract=1492566

Robert Cull (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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HOME PAGE: http://econ.worldbank.org/staff/rcull

Asli Demirgüç-Kunt

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Jonathan Morduch

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

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New York University (NYU) - Department of Economics ( email )

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HOME PAGE: http://www.nyu.edu/projects/morduch

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