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

35 Pages Posted: 20 Apr 2016

See all articles by Shahidur R. Khandker

Shahidur R. Khandker

World Bank - Development Research Group (DECRG)

Gayatri B. Koolwal

World Bank

Syed Badruddoza

Washington State University

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2013

Abstract

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.

Keywords: Debt Markets, Banks & Banking Reform, Emerging Markets, Microfinance, Rural Finance

Suggested Citation

Khandker, Shahidur R. and Koolwal, Gayatri B. and Badruddoza, Syed, How Does Competition Affect the Performance of Mfis? Evidence from Bangladesh (April 1, 2013). World Bank Policy Research Working Paper No. 6408, Available at SSRN: https://ssrn.com/abstract=2251714

Shahidur R. Khandker (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Gayatri B. Koolwal

World Bank ( email )

United States

Syed Badruddoza

Washington State University

Wilson Rd.
College of Business
Pullman, WA 99164
United States

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