We thank two anonymous reviewers for extremely helpful comments.
Borrower Targeting under Microfinance Competition with Motivated Microfinance Institutions and Strategic Complementarity
Article first published online: 19 AUG 2014
© 2014 Institute of Developing Economies
The Developing Economies
Volume 52, Issue 3, pages 211–240, September 2014
How to Cite
Guha, B. and Chowdhury, P. R. (2014), Borrower Targeting under Microfinance Competition with Motivated Microfinance Institutions and Strategic Complementarity. The Developing Economies, 52: 211–240. doi: 10.1111/deve.12047
- Issue published online: 19 AUG 2014
- Article first published online: 19 AUG 2014
- Manuscript Accepted: APR 2014
- Manuscript Received: JUL 2013
- Microfinance competition;
- Motivated MFIs;
- Borrower targeting;
We examine how increased competition among motivated microfinance institutions (MFIs) impacts the poorest borrowers' access to microfinance. We find that competition depends on inequality, technology, and the possibility of double-dipping (borrowing from several sources). Without competition, even a motivated MFI may lend to the not-so-poor in preference to poor borrowers. If double-dipping is feasible, competition may encourage lending to the poor. The presence of double-dipping is critical for MFI competition to have a positive effect. When double-dipping is feasible, MFI coordination may worsen borrower targeting whenever inequality is intermediate. We discuss policy implications dealing with double-dipping, MFI coordination, and competition.