Reference : Do banks and microfinance institutions compete? Microevidence from Madagascar
Scientific journals : Article
Business & economic sciences : Finance
Do banks and microfinance institutions compete? Microevidence from Madagascar
Leon, Florian* mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Baraton, Pierrick* mailto []
* These authors have contributed equally to this work.
In press
Economic Development and Cultural Change
University of Chicago Press
Yes (verified by ORBilu)
[en] Competition ; Banks ; Microfinance ; Loans
[en] This paper examines whether the loan strategy of a microfinance institution is shaped by the entry of a bank. Specifically, we investigate whether the distance between a borrower of a microfinance institution and the closest bank influences loan conditions provided by the microfinance institution. We use an original panel dataset of 32,374 loans granted to 14,834 borrowers provided by one of the largest microfinance institutions in Madagascar between 2008 and 2014. We find that the closer a bank is located to a given MFI borrower, the larger the loan obtained and the less collateral required. We also find that the effect is stronger for clients that could be more easily caught by banks (i.e., large firms and clients without a previous relationship with the MFI).

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