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Refinancing MFIs with market power: theory and evidence

Author

Listed:
  • Lutz G. Arnold

    (University of Regensburg)

  • Benedikt Booker

    (University of Regensburg)

  • Gregor Dorfleitner

    (University of Regensburg)

  • Michaela Röhe

    (University of Regensburg)

Abstract

Microfinance investment vehicles (MIVs) play an increasingly important role as a source of funding for microfinance institutions (MFIs). This paper presents theory and evidence on the relation between the use of MIV capital and MFI market power. We present a model in which MIVs are social-minded in that they do not lend to MFIs which exploit their market power in the market for microcredit. Consistent with the theoretical model, we find empirically that measures of MFI market power are negatively related to the likelihood of using MIV capital. This suggests that MIVs play an effective role in promoting social objectives in microfinance.

Suggested Citation

  • Lutz G. Arnold & Benedikt Booker & Gregor Dorfleitner & Michaela Röhe, 2021. "Refinancing MFIs with market power: theory and evidence," Small Business Economics, Springer, vol. 56(4), pages 1485-1505, April.
    • Handle: RePEc:kap:sbusec:v:56:y:2021:i:4:d:10.1007_s11187-019-00252-8
    DOI: 10.1007/s11187-019-00252-8
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    References listed on IDEAS

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