Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/123797 
Year of Publication: 
2014
Series/Report no.: 
Working Paper No. 2014:8
Publisher: 
Uppsala University, Department of Economics, Uppsala
Abstract: 
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.
Subjects: 
microfinance institutions
competition
outreach
financial performance
capitalization
panel data IV estimation
JEL: 
G21
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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