Competition and the Performance of Microfinance Institutions

43 Pages Posted: 28 Mar 2012

See all articles by Esubalew Assefa

Esubalew Assefa

affiliation not provided to SSRN

Niels Hermes

University of Groningen - Faculty of Economics and Business

Aljar Meesters

University of Groningen - Faculty of Economics and Business

Date Written: March 27, 2012

Abstract

This paper examines the relationship between competition and the performance of microfinance institutions (MFIs). We measure competition by constructing a Lerner index. Next, we assess the association between increased competition among MFIs on the one hand and outreach and loan repayment performance on the other. The empirical investigation is based on data from 362 MFIs in 73 countries for the period 1995-2008. Based on our measure of competition we do find a general trend of increased competition in microfinance during the last decade. Our econometric analysis provides evidence that competition among MFIs is negatively associated with various measures of performance.

Keywords: Microfinance Institutions, Competition, Financial Intermediation

JEL Classification: G21, L1, O16

Suggested Citation

Assefa, Esubalew and Hermes, Niels and Meesters, Aljar, Competition and the Performance of Microfinance Institutions (March 27, 2012). Available at SSRN: https://ssrn.com/abstract=2029568 or http://dx.doi.org/10.2139/ssrn.2029568

Esubalew Assefa

affiliation not provided to SSRN ( email )

Niels Hermes (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Aljar Meesters

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

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