The effect of competition, regulation and profit orientation on the social and financial performance of microfinance institutions
|This study uses a panel of 1490 microfinance institutions from 111 different countries over the period of 2003-2011 to address what effect competition, profit orientation, and regulation have on the social and financial performance of microfinance institutions. For the measurement of competition, the Lerner index and Boone indicator are considered. Moreover is controlled for diverse institution-specific and country-specific variation. The results indicate that competition has a negative effect on the social and financial performance of microfinance institutions (MFIs). Furthermore, it is shown that for-profit and nonprofit MFIs are similar in terms of social performance, but not in terms of financial performance. In addition, when facing competition, for-profit have similar social performance but lower financial performance compared to nonprofit MFIs. Further, regulation has a negative effect on the social performance of MFIs. The effect of regulation on the financial performance shows mixed results, with a lower interest rate and lower costs per dollar loaned. Lastly, under the condition of regulation, for-profit MFIs have a lower social and financial performance compared to nonprofit MFIs.
|Faculteit der Managementwetenschappen
|Corporate Finace & Control
|The effect of competition, regulation and profit orientation on the social and financial performance of microfinance institutions