Are microfinance markets monopolistic?

Ashim Kumar Kar, Ranjula Bali Swain

    Research output: Contribution to journalArticleScientificpeer-review

    Abstract

    Do microfinance institutions (MFIs) operate in a monopoly, monopolistic competition environment or are their revenues derived under perfect competition markets? We employ the Panzar–Rosse revenue test on a global panel data to assess the competitive environment in which MFIs of five selected countries operate: Ecuador, India, Indonesia, Peru and Philippines, over the period 2005–2009. We estimate the static and the dynamic revenue tests, with analyses of the interest rate and the return on assets. We control for microfinance-specific variables such as capital assets-ratio, loans-assets and the size of the MFI. The analyses also account for the endogeneity problem by employing the fixed-effects two-stage least squares and the fixed-effects system generalized method of moments. Our results suggest that MFIs in Peru and India operate in a monopolistic environment. We also find weak evidence that the microfinance industry in Ecuador, Indonesia and Philippines may operate under perfect competition.
    Original languageEnglish
    JournalApplied Economics
    Volume50
    Issue number1
    Pages (from-to)1-14
    Number of pages14
    ISSN0003-6846
    DOIs
    Publication statusPublished - 2018
    MoE publication typeA1 Journal article-refereed

    Fields of Science

    • 511 Economics
    • Microfinance
    • competition
    • market structure
    • dynamic panel data estimation
    • GMM Estimation
    • Panzar–Rosse revenue tests

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