Competition, Loan Rates and Information Dispersion in Microcredit Markets
|Title||Competition, Loan Rates and Information Dispersion in Microcredit Markets|
|Publication Type||Working Paper|
|Year of Publication||2013|
|Authors||Baquero, G, Hamadi, M, Heinen, A|
|Keywords||bank competition, information dispersion, Loan rates, microfinance, nonprofit institutions|
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. First, we find that nonprofits are relatively insensitive to concentration changes, while for-profits charge significantly lower rates in less concentrated markets. We control for interest rate ceilings and other country-specific factors. Second, we find competitive pressures on nonprofits from increased for-profit market share. Third, we show that the effects of concentration are consistent with an information dispersion mechanism.