Competition and microfinance

Competition between Microfinance Institutions and the Formal Banking Sector

How Rising Competition Among Microfinance Institutions Affects Incumbent Lenders

This paper uses data from Uganda’s largest incumbent microfinance institution to analyze the impact of entry by competing lenders on client behavior. We examine the geographic placement decisions of competitors, and find that lenders of different types cluster spatially and have pushed into rural areas in recent years. We observe that increased competition induces a decline in repayment perform...

Microfinance and Dynamic Incentives

Dynamic incentives, where incentives to repay are generated by granting access to future loans, is one of the methodologies used by microfinance institutions (MFIs). In this paper, I present a model of dynamic incentives where lenders are uncertain over how much borrowers value future loans. Loan terms are determined endogenously, and loans become more favorable as the probability of default be...

Microfinance and Financial Development

Microfinance Games

Microfinance has been heralded as an effective way to address imperfections in credit markets. From a theoretical perspective, however, the success of microfinance contracts has puzzling elements. In particular, the group-based mechanisms often employed are vulnerable to free-riding and collusion, although they can also reduce moral hazard and improve selection. We created an experimental econo...