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    Does competition enhance the double-bottom-line performance of microfinance institutions?

    Access Status
    Fulltext not available
    Authors
    Hossain, Shahadat
    Galbreath, Jeremy
    Hasan, Mostafa
    Randøy, T.
    Date
    2020
    Type
    Journal Article
    
    Metadata
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    Citation
    Hossain, S. and Galbreath, J. and Hasan, M.M. and Randøy, T. 2020. Does competition enhance the double-bottom-line performance of microfinance institutions? Journal of Banking and Finance. 113: Artcile No. 105765.
    Source Title
    Journal of Banking and Finance
    DOI
    10.1016/j.jbankfin.2020.105765
    ISSN
    0378-4266
    Faculty
    Faculty of Business and Law
    School
    School of Accounting, Economics and Finance
    School of Management and Marketing
    School of Economics, Finance and Property
    URI
    http://hdl.handle.net/20.500.11937/85245
    Collection
    • Curtin Research Publications
    Abstract

    This paper investigates how competition affects the double-bottom-line performance of microfinance institutions (MFIs). While classical economic theory highlights that competition enhances efficiency and benefits both customers and firms, we argue that this is unlikely to apply to institutions operating in socially oriented industries, such as microfinance. Using a cross-country dataset of 4576 MFI-year observations (1139 unique MFIs) operating in 59 countries over a 10-year period (2005-2014), we find that competition has an adverse effect on MFIs’ economic sustainability and that competition undermines their breadth of outreach but enhances their depth of outreach. These results are robust to alternative specifications of competition and to the use of a two-stage least squares (2SLS) analysis to alleviate the endogeneity concern. The findings from our analysis have important implications when considering the regulation of MFI competition, especially in the light of the recent turmoil of MFI markets in some developing countries.

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