How Rising Competition Among Microfinance Institutions Affects Incumbent Lenders
نویسندگان
چکیده
This paper uses data from Uganda’s largest incumbent microfinance institution to analyze the impact of entry by competing lenders on client behavior. We examine the geographic placement decisions of competitors, and find that lenders of different types cluster spatially and have pushed into rural areas in recent years. 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.
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