How Does Competition Affect the Performance of MFIs? Evidence from Bangladesh
Over the past 20 years, Bangladesh has witnessed strong competition among microfinance institutions. Using program-level panel data from 2005-2010, this paper studies the microfinance institutions' recent competitive roles in their pricing of...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/04/17580708/competition-affect-performance-mfis-evidence-bangladesh http://hdl.handle.net/10986/14446 |
| Summary: | Over the past 20 years, Bangladesh has
witnessed strong competition among microfinance
institutions. Using program-level panel data from 2005-2010,
this paper studies the microfinance institutions'
recent competitive roles in their pricing of products,
targeting strategies and portfolio shifts, as well as their
ability to recover loans. The findings do not support the
view that newer microfinance institutions are less
risk-averse in their targeting, or that increased borrowing
among households due to microfinance institution competition
has lowered recovery rates. There is also a considerable
urban-rural distinction; although newer microfinance
institutions tend to attract riskier clients in urban areas,
the opposite is true in rural areas. Loan recovery rates are
also the highest among the newest microfinance institutions
for women in rural areas, suggesting that microfinance
institutions may offer distinct products in these areas to
attract better-risk clients. The portfolio of newer
microfinance institutions also has a greater share of
lending for agriculture, and fewer savings products. |
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