How Rising Competition among Microfinance Institutions Affects Incumbent Lenders

Craig McIntosh · Alain de Janvry · Élisabeth Sadoulet

184 citations0/0 files storedThe Economic Journal

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Abstract

This article uses data from Uganda’s largest incumbent microfinance institution to analyse the impact of entry by competing lenders on client behaviour. We observe that rising competition does not lead to an increase in client dropout rate, but induces a decline in repayment performance and savings deposited with the incumbent, suggesting rising multiple loan‐taking by clients. This joint effect on dropout and repayment is consistent with some negative information about clients and is being shared across lenders. However, the observed decline in repayment rates in a context of rising multiple loan‐taking shows that information sharing about clients is far from complete.

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References

1993Finance, entrepreneurship and growth 1995The Effect of Credit Market Competition on Lending Relationships 1990Financial Development, Growth, and the Distribution of Income 1989Financial Development, Growth, and the Distribution of Income 1993Financial markets and growth 1995Group lending, repayment incentives and social collateral 1999Outreach, sustainability and leverage in monitored and peer-monitored lending 2002Competition, Adverse Selection, and Information Dispersion in the Banking Industry: Table 1

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2013Microfinance and the challenge of financial inclusion for development 2009The supply- and demand-side impacts of credit market information 2018DETERMINANTS OF THE PERFORMANCE OF MICROFINANCE INSTITUTIONS: A SYSTEMATIC REVIEW 2015Outreach and performance of microfinance institutions: a panel analysis 2013Banks and Microbanks 2019Ability or opportunity to act: What shapes financial well-being?

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