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...

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Main Authors:	Khandker, Shahidur R., Koolwal, Gayatri B., Badruddoza, Syed
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, D.C. 2013
Subjects:	ACCESS TO MARKETS ACCOUNTING ADVERSE SELECTION AGRICULTURAL CREDIT ASYMMETRIC INFORMATION AVAILABILITY OF CREDIT BANK POLICY BORROWER BRANCH BRANCHES CENTRAL BANK CLIENT BASE COLLATERAL COMMERCIAL BANKS COMMERCIAL INVESTMENT COMPETITIVE MARKET CONSTRAINTS ON BORROWERS CONSUMER PROTECTION COOPERATIVES CREDIT ACCESS CREDIT BUREAU CREDIT BUREAUS CREDIT MARKET CREDIT MARKETS CREDIT PRODUCTS CREDIT PROGRAMS CREDIT SCORING CROP LOANS DEBT DEFAULT RATES DEFAULTS DEMAND FOR CREDIT DEVELOPING COUNTRIES DISBURSEMENT DISBURSEMENTS DIVERSIFICATION ECONOMIC CRISIS EXPANSIONS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL REGULATION FINANCIAL STUDIES GRAMEEN BANK GROUP SAVINGS GROWTH RATE HOUSING HOUSING LOANS INCOME INCOMES INDEBTEDNESS INFORMATION ON BORROWERS INSTITUTIONAL FUNDS INSTRUMENT INTEREST RATE INTEREST RATES INTEREST RATES FOR LOANS INTEREST RATES ON LOANS INTERNATIONAL BANK JOINT LIABILITY LEGISLATION LENDER LENDERS LENDING INSTITUTIONS LIABILITY LITERACY LOAN LOAN CONTRACTS LOAN DEFAULTS LOAN PARTICIPANTS LOAN RECOVERY LOAN REPAYMENT LOAN REPAYMENTS LOAN SIZES MARKET ENTRY MARKET INFORMATION MFI MICRO-CREDIT MICROBANKING MICROCREDIT MICROFINANCE MICROFINANCE INDUSTRY MICROFINANCE INSTITUTION MICROFINANCE INSTITUTIONS MICROFINANCE LENDING MICROFINANCE MARKET MICROFINANCE MARKETS MICROFINANCE ORGANIZATIONS MICROFINANCE PROGRAM MICROFINANCE PROGRAMS MICROFINANCE REGULATION MICROLENDING MICROLOANS MONEYLENDERS NET SAVINGS NEW ENTRANTS OPERATING COSTS OPERATING EXPENSES OUTREACH PARTICULAR COUNTRY PARTY PENALTIES POOL OF BORROWERS POOR HOUSEHOLDS PORTFOLIO PORTFOLIOS POVERTY ALLEVIATION PRIVATE BANKS PROFITABILITY PUBLIC POLICIES PUBLIC POLICY RAPID EXPANSION REGULATORY AGENCY REGULATORY AUTHORITY REMOTE AREAS REPAYMENT REPAYMENT BEHAVIOR REPAYMENT SCHEDULE RETURN RETURNS RISKY BORROWERS RURAL BORROWERS SAVINGS RATES SMALL BUSINESS SMALL BUSINESS LOANS SUBSIDIARY SUSTAINABLE MICROFINANCE TRANSACTION TRANSACTION COSTS WHOLESALE FUNDING
Online Access:	http://documents.worldbank.org/curated/en/2013/04/17580708/competition-affect-performance-mfis-evidence-bangladesh http://hdl.handle.net/10986/14446

id	okr-10986-14446
recordtype	oai_dc
spelling	okr-10986-144462021-04-23T14:03:19Z How Does Competition Affect the Performance of MFIs? Evidence from Bangladesh Khandker, Shahidur R. Koolwal, Gayatri B. Badruddoza, Syed ACCESS TO MARKETS ACCOUNTING ADVERSE SELECTION AGRICULTURAL CREDIT ASYMMETRIC INFORMATION AVAILABILITY OF CREDIT BANK POLICY BORROWER BRANCH BRANCHES CENTRAL BANK CLIENT BASE COLLATERAL COMMERCIAL BANKS COMMERCIAL INVESTMENT COMPETITIVE MARKET CONSTRAINTS ON BORROWERS CONSUMER PROTECTION COOPERATIVES CREDIT ACCESS CREDIT BUREAU CREDIT BUREAUS CREDIT MARKET CREDIT MARKETS CREDIT PRODUCTS CREDIT PROGRAMS CREDIT SCORING CROP LOANS DEBT DEFAULT RATES DEFAULTS DEMAND FOR CREDIT DEVELOPING COUNTRIES DISBURSEMENT DISBURSEMENTS DIVERSIFICATION ECONOMIC CRISIS EXPANSIONS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL REGULATION FINANCIAL STUDIES GRAMEEN BANK GROUP SAVINGS GROWTH RATE HOUSING HOUSING LOANS INCOME INCOMES INDEBTEDNESS INFORMATION ON BORROWERS INSTITUTIONAL FUNDS INSTRUMENT INTEREST RATE INTEREST RATES INTEREST RATES FOR LOANS INTEREST RATES ON LOANS INTERNATIONAL BANK JOINT LIABILITY LEGISLATION LENDER LENDERS LENDING INSTITUTIONS LIABILITY LITERACY LOAN LOAN CONTRACTS LOAN DEFAULTS LOAN PARTICIPANTS LOAN RECOVERY LOAN REPAYMENT LOAN REPAYMENTS LOAN SIZES MARKET ENTRY MARKET INFORMATION MFI MICRO-CREDIT MICROBANKING MICROCREDIT MICROFINANCE MICROFINANCE INDUSTRY MICROFINANCE INSTITUTION MICROFINANCE INSTITUTIONS MICROFINANCE LENDING MICROFINANCE MARKET MICROFINANCE MARKETS MICROFINANCE ORGANIZATIONS MICROFINANCE PROGRAM MICROFINANCE PROGRAMS MICROFINANCE REGULATION MICROLENDING MICROLOANS MONEYLENDERS NET SAVINGS NEW ENTRANTS OPERATING COSTS OPERATING EXPENSES OUTREACH PARTICULAR COUNTRY PARTY PENALTIES POOL OF BORROWERS POOR HOUSEHOLDS PORTFOLIO PORTFOLIOS POVERTY ALLEVIATION PRIVATE BANKS PROFITABILITY PUBLIC POLICIES PUBLIC POLICY RAPID EXPANSION REGULATORY AGENCY REGULATORY AUTHORITY REMOTE AREAS REPAYMENT REPAYMENT BEHAVIOR REPAYMENT SCHEDULE RETURN RETURNS RISKY BORROWERS RURAL BORROWERS SAVINGS RATES SMALL BUSINESS SMALL BUSINESS LOANS SUBSIDIARY SUSTAINABLE MICROFINANCE TRANSACTION TRANSACTION COSTS WHOLESALE FUNDING 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. 2013-07-10T18:20:55Z 2013-07-10T18:20:55Z 2013-04 http://documents.worldbank.org/curated/en/2013/04/17580708/competition-affect-performance-mfis-evidence-bangladesh http://hdl.handle.net/10986/14446 English en_US Policy Research Working Paper;No.6408 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research South Asia Bangladesh
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACCESS TO MARKETS ACCOUNTING ADVERSE SELECTION AGRICULTURAL CREDIT ASYMMETRIC INFORMATION AVAILABILITY OF CREDIT BANK POLICY BORROWER BRANCH BRANCHES CENTRAL BANK CLIENT BASE COLLATERAL COMMERCIAL BANKS COMMERCIAL INVESTMENT COMPETITIVE MARKET CONSTRAINTS ON BORROWERS CONSUMER PROTECTION COOPERATIVES CREDIT ACCESS CREDIT BUREAU CREDIT BUREAUS CREDIT MARKET CREDIT MARKETS CREDIT PRODUCTS CREDIT PROGRAMS CREDIT SCORING CROP LOANS DEBT DEFAULT RATES DEFAULTS DEMAND FOR CREDIT DEVELOPING COUNTRIES DISBURSEMENT DISBURSEMENTS DIVERSIFICATION ECONOMIC CRISIS EXPANSIONS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL REGULATION FINANCIAL STUDIES GRAMEEN BANK GROUP SAVINGS GROWTH RATE HOUSING HOUSING LOANS INCOME INCOMES INDEBTEDNESS INFORMATION ON BORROWERS INSTITUTIONAL FUNDS INSTRUMENT INTEREST RATE INTEREST RATES INTEREST RATES FOR LOANS INTEREST RATES ON LOANS INTERNATIONAL BANK JOINT LIABILITY LEGISLATION LENDER LENDERS LENDING INSTITUTIONS LIABILITY LITERACY LOAN LOAN CONTRACTS LOAN DEFAULTS LOAN PARTICIPANTS LOAN RECOVERY LOAN REPAYMENT LOAN REPAYMENTS LOAN SIZES MARKET ENTRY MARKET INFORMATION MFI MICRO-CREDIT MICROBANKING MICROCREDIT MICROFINANCE MICROFINANCE INDUSTRY MICROFINANCE INSTITUTION MICROFINANCE INSTITUTIONS MICROFINANCE LENDING MICROFINANCE MARKET MICROFINANCE MARKETS MICROFINANCE ORGANIZATIONS MICROFINANCE PROGRAM MICROFINANCE PROGRAMS MICROFINANCE REGULATION MICROLENDING MICROLOANS MONEYLENDERS NET SAVINGS NEW ENTRANTS OPERATING COSTS OPERATING EXPENSES OUTREACH PARTICULAR COUNTRY PARTY PENALTIES POOL OF BORROWERS POOR HOUSEHOLDS PORTFOLIO PORTFOLIOS POVERTY ALLEVIATION PRIVATE BANKS PROFITABILITY PUBLIC POLICIES PUBLIC POLICY RAPID EXPANSION REGULATORY AGENCY REGULATORY AUTHORITY REMOTE AREAS REPAYMENT REPAYMENT BEHAVIOR REPAYMENT SCHEDULE RETURN RETURNS RISKY BORROWERS RURAL BORROWERS SAVINGS RATES SMALL BUSINESS SMALL BUSINESS LOANS SUBSIDIARY SUSTAINABLE MICROFINANCE TRANSACTION TRANSACTION COSTS WHOLESALE FUNDING
spellingShingle	ACCESS TO MARKETS ACCOUNTING ADVERSE SELECTION AGRICULTURAL CREDIT ASYMMETRIC INFORMATION AVAILABILITY OF CREDIT BANK POLICY BORROWER BRANCH BRANCHES CENTRAL BANK CLIENT BASE COLLATERAL COMMERCIAL BANKS COMMERCIAL INVESTMENT COMPETITIVE MARKET CONSTRAINTS ON BORROWERS CONSUMER PROTECTION COOPERATIVES CREDIT ACCESS CREDIT BUREAU CREDIT BUREAUS CREDIT MARKET CREDIT MARKETS CREDIT PRODUCTS CREDIT PROGRAMS CREDIT SCORING CROP LOANS DEBT DEFAULT RATES DEFAULTS DEMAND FOR CREDIT DEVELOPING COUNTRIES DISBURSEMENT DISBURSEMENTS DIVERSIFICATION ECONOMIC CRISIS EXPANSIONS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL REGULATION FINANCIAL STUDIES GRAMEEN BANK GROUP SAVINGS GROWTH RATE HOUSING HOUSING LOANS INCOME INCOMES INDEBTEDNESS INFORMATION ON BORROWERS INSTITUTIONAL FUNDS INSTRUMENT INTEREST RATE INTEREST RATES INTEREST RATES FOR LOANS INTEREST RATES ON LOANS INTERNATIONAL BANK JOINT LIABILITY LEGISLATION LENDER LENDERS LENDING INSTITUTIONS LIABILITY LITERACY LOAN LOAN CONTRACTS LOAN DEFAULTS LOAN PARTICIPANTS LOAN RECOVERY LOAN REPAYMENT LOAN REPAYMENTS LOAN SIZES MARKET ENTRY MARKET INFORMATION MFI MICRO-CREDIT MICROBANKING MICROCREDIT MICROFINANCE MICROFINANCE INDUSTRY MICROFINANCE INSTITUTION MICROFINANCE INSTITUTIONS MICROFINANCE LENDING MICROFINANCE MARKET MICROFINANCE MARKETS MICROFINANCE ORGANIZATIONS MICROFINANCE PROGRAM MICROFINANCE PROGRAMS MICROFINANCE REGULATION MICROLENDING MICROLOANS MONEYLENDERS NET SAVINGS NEW ENTRANTS OPERATING COSTS OPERATING EXPENSES OUTREACH PARTICULAR COUNTRY PARTY PENALTIES POOL OF BORROWERS POOR HOUSEHOLDS PORTFOLIO PORTFOLIOS POVERTY ALLEVIATION PRIVATE BANKS PROFITABILITY PUBLIC POLICIES PUBLIC POLICY RAPID EXPANSION REGULATORY AGENCY REGULATORY AUTHORITY REMOTE AREAS REPAYMENT REPAYMENT BEHAVIOR REPAYMENT SCHEDULE RETURN RETURNS RISKY BORROWERS RURAL BORROWERS SAVINGS RATES SMALL BUSINESS SMALL BUSINESS LOANS SUBSIDIARY SUSTAINABLE MICROFINANCE TRANSACTION TRANSACTION COSTS WHOLESALE FUNDING Khandker, Shahidur R. Koolwal, Gayatri B. Badruddoza, Syed How Does Competition Affect the Performance of MFIs? Evidence from Bangladesh
geographic_facet	South Asia Bangladesh
relation	Policy Research Working Paper;No.6408
description	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.
format	Publications & Research :: Policy Research Working Paper
author	Khandker, Shahidur R. Koolwal, Gayatri B. Badruddoza, Syed
author_facet	Khandker, Shahidur R. Koolwal, Gayatri B. Badruddoza, Syed
author_sort	Khandker, Shahidur R.
title	How Does Competition Affect the Performance of MFIs? Evidence from Bangladesh
title_short	How Does Competition Affect the Performance of MFIs? Evidence from Bangladesh
title_full	How Does Competition Affect the Performance of MFIs? Evidence from Bangladesh
title_fullStr	How Does Competition Affect the Performance of MFIs? Evidence from Bangladesh
title_full_unstemmed	How Does Competition Affect the Performance of MFIs? Evidence from Bangladesh
title_sort	how does competition affect the performance of mfis? evidence from bangladesh
publisher	World Bank, Washington, D.C.
publishDate	2013
url	http://documents.worldbank.org/curated/en/2013/04/17580708/competition-affect-performance-mfis-evidence-bangladesh http://hdl.handle.net/10986/14446
_version_	1764429330398576640

How Does Competition Affect the Performance of MFIs? Evidence from Bangladesh

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