Banks and Microbanks

Robert Cull, Asli Demirgüç-Kunt, Jonathan Morduch

Research output: Contribution to journalArticle

Abstract

We combine two datasets to examine whether the presence of banks affects the profitability and outreach of microfinance institutions. We find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks relying on commercial-funding and using traditional bilateral lending contracts (rather than group lending methods favored by microfinance NGOs). We consider plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment, but we fail to find strong support for these alternative hypotheses.

Original languageEnglish (US)
Pages (from-to)1-53
Number of pages53
JournalJournal of Financial Services Research
Volume46
Issue number1
DOIs
StatePublished - 2014

Fingerprint

Outreach
Loans
Bilateral
Lending
Regulatory environment
Penetration
Microfinance
Group lending
Funding
Profitability
Non-governmental organizations
Banking
Microfinance institutions

Keywords

  • Banks
  • Depository institutions
  • Micro finance institutions
  • Mortgages

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

Banks and Microbanks. / Cull, Robert; Demirgüç-Kunt, Asli; Morduch, Jonathan.

In: Journal of Financial Services Research, Vol. 46, No. 1, 2014, p. 1-53.

Research output: Contribution to journalArticle

Cull, Robert ; Demirgüç-Kunt, Asli ; Morduch, Jonathan. / Banks and Microbanks. In: Journal of Financial Services Research. 2014 ; Vol. 46, No. 1. pp. 1-53.
@article{25c573a8a61f44ab9e46e1ceaff8e062,
title = "Banks and Microbanks",
abstract = "We combine two datasets to examine whether the presence of banks affects the profitability and outreach of microfinance institutions. We find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks relying on commercial-funding and using traditional bilateral lending contracts (rather than group lending methods favored by microfinance NGOs). We consider plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment, but we fail to find strong support for these alternative hypotheses.",
keywords = "Banks, Depository institutions, Micro finance institutions, Mortgages",
author = "Robert Cull and Asli Demirg{\"u}{\cc}-Kunt and Jonathan Morduch",
year = "2014",
doi = "10.1007/s10693-013-0177-z",
language = "English (US)",
volume = "46",
pages = "1--53",
journal = "Journal of Financial Services Research",
issn = "0920-8550",
publisher = "Springer Netherlands",
number = "1",

}

TY - JOUR

T1 - Banks and Microbanks

AU - Cull, Robert

AU - Demirgüç-Kunt, Asli

AU - Morduch, Jonathan

PY - 2014

Y1 - 2014

N2 - We combine two datasets to examine whether the presence of banks affects the profitability and outreach of microfinance institutions. We find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks relying on commercial-funding and using traditional bilateral lending contracts (rather than group lending methods favored by microfinance NGOs). We consider plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment, but we fail to find strong support for these alternative hypotheses.

AB - We combine two datasets to examine whether the presence of banks affects the profitability and outreach of microfinance institutions. We find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks relying on commercial-funding and using traditional bilateral lending contracts (rather than group lending methods favored by microfinance NGOs). We consider plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment, but we fail to find strong support for these alternative hypotheses.

KW - Banks

KW - Depository institutions

KW - Micro finance institutions

KW - Mortgages

UR - http://www.scopus.com/inward/record.url?scp=84904553588&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84904553588&partnerID=8YFLogxK

U2 - 10.1007/s10693-013-0177-z

DO - 10.1007/s10693-013-0177-z

M3 - Article

VL - 46

SP - 1

EP - 53

JO - Journal of Financial Services Research

JF - Journal of Financial Services Research

SN - 0920-8550

IS - 1

ER -