How Rising Competition Among Microfinance Lenders Affects Incumbent Village Banks

This paper uses data from Uganda's largest incumbent microfinance institution to analyze the impact of entry by competing lenders on client behavior. We first examine the geographic placement decisions of competitors, and find that placement decisions are strongly affected by district-level characteristics. We observe that increased competition induces a decline in repayment performance and in savings deposited with the incumbent Village Bank, suggesting multiple loan-taking by clients. Urban clients take multiple loans primarily from lenders with more individual methodologies, while rural clients borrow from several group lenders. Individuals who operate larger businesses are the ones most likely to leave the incumbent Village Bank when a Solidarity Group lender enters the marketplace.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/25073
Total Pages:
33
JEL Codes:
O16; D14; L1
Series Statement:
CUDARE Working Paper 987




 Record created 2017-04-01, last modified 2017-04-04

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