Competition, loan rates, and information dispersion in nonprofit and for-profit microcredit markets

Guillermo Baquero, Malika Hamadi, Andreas Heinen

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    9 Citations (Scopus)
    75 Downloads (Pure)

    Abstract

    We describe the competitive environment of microcredit markets globally and we study the effects of competition on loan rates of microfinance institutions (MFIs). We use a new database from rating agencies, covering 379 for-profit and nonprofit MFIs in 67 countries over 2002–2008. Controlling for interest rate ceilings and other country-specific factors, we first find that nonprofits are relatively insensitive to industry-wide concentration changes, while for-profits charge significantly lower rates in less concentrated markets. Second, we find spillover effects between the for-profit and non-profit segments. Third, we show that the effects of concentration are consistent with an information dispersion mechanism.
    Original languageEnglish
    Pages (from-to)893-937
    Number of pages45
    JournalJournal of Money, Credit and Banking
    Volume50
    Issue number5
    Early online date23 May 2018
    DOIs
    Publication statusPublished - Aug 2018

    Keywords

    • loan rates
    • bank competition
    • microfinance
    • information dispersion
    • nonprofit institutions

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