IDEAS home Printed from https://ideas.repec.org/p/imb/wpaper/7.html
   My bibliography  Save this paper

Dynamics of Market Share in The Microfinance Industry in Bangladesh

Author

Listed:
  • Chowdhury Shameem Mahmoud
  • Baqui Khalily
  • Syed Naimul Wadood

Abstract

The microfinance industry in Bangladesh has seen emergence of large variations in the size of the institutions operating in the market. Data from a recent survey of Pathrail union in Tangail district reveals that within the local market competition is becoming more and more intense over time. Market segmentation has emerged where some borrowers and MFIs opt for a package of low interest rates with low amount of loan disbursed and some other borrowers and MFIs settle for a package of high interest rates with high amount of loan disbursed. A Tobit regression estimation of member market shares in village micro credit market shows that size of the MFI, years of operation in the village, average loan size, deposit interest rates, loan amount disbursed for unique loan purposes (i.e., housing loan) are key determinants in determining MFI shares of a village microcredit market. The paper concludes that competition has increased in recent years since a large number of local small-size MFIs have started competing with national-level MFIs. There is no indication that one particular group of MFIs (i.e., large ones) could take over the control of the entire market by driving out another group (i.e., small ones). Increased product diversification is evident in the market, as well as competition in the interest rates being charged and loan amount being offered. Multiple membership is one strategy pursued by the MFIs while faced with increased competition. Within the small survey area, MFIs have exhibited a tendency to concentrate their operations in more economically advanced regions, whereas the reverse is true for economically backward regions. If this pattern is observed throughout the entire country in a future nationally representative survey, this would imply that the original poverty alleviation objective of micro credit would be compromised, since MFIs would tend to overlook economically backward regions. Therefore policy recommendation is to provide incentives to MFIs to operate in backward regions, and provide technical assistance to local small-scale MFIs for facing increased competition in the future.

Suggested Citation

  • Chowdhury Shameem Mahmoud & Baqui Khalily & Syed Naimul Wadood, 2010. "Dynamics of Market Share in The Microfinance Industry in Bangladesh," Working Papers 7, Institute of Microfinance (InM).
    • Handle: RePEc:imb:wpaper:7
    as

    Download full text from publisher

    File URL: http://inm.org.bd/publication/workingpaper/workingpaper7.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert Cull & Asli Demirgüç-Kunt & Jonathan Morduch, 2009. "Microfinance Meets the Market," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 167-192, Winter.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wadood, Syed Naimul & Mahmoud, Chowdhury Shameem, 2010. "Location Decisions of Microfinance Institutions of Bangladesh," MPRA Paper 88605, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Junyon Im & Sunny Sun, 2015. "Profits and outreach to the poor: The institutional logics of microfinance institutions," Asia Pacific Journal of Management, Springer, vol. 32(1), pages 95-117, March.
    2. de Quidt, Jonathan & Fetzer, Thiemo & Ghatak, Maitreesh, 2018. "Commercialization and the decline of joint liability microcredit," Journal of Development Economics, Elsevier, vol. 134(C), pages 209-225.
    3. Dehejia, Rajeev & Montgomery, Heather & Morduch, Jonathan, 2012. "Do interest rates matter? Credit demand in the Dhaka slums," Journal of Development Economics, Elsevier, vol. 97(2), pages 437-449.
    4. Ahlin, Christian & Debrah, Godwin, 2022. "Group lending with covariate risk," Journal of Development Economics, Elsevier, vol. 157(C).
    5. Knar Khachatryan & Vardan Baghdasaryan & Valentina Hartarska, 2018. "Is the model loans-plus-savings better for microfinance in ECA? A PSM comparison," Working Paper c5a69366-4231-479c-879d-c, European Microfinance Network.
    6. Hudon, Marek & Périlleux, Anaïs, 2014. "Surplus distribution and characteristics of social enterprises: Evidence from microfinance," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(2), pages 147-157.
    7. Shawn Cole & Xavier Gine & Jeremy Tobacman & Petia Topalova & Robert Townsend & James Vickery, 2013. "Barriers to Household Risk Management: Evidence from India," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 104-135, January.
    8. Sara Biancini & David Ettinger & Baptiste Venet, 2017. "Mission Drift in Microcredit and Microfinance Institution Incentives," Economics Working Paper Archive (University of Rennes & University of Caen) 2017-02, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    9. Sara Biancini & David Ettinger & Baptiste Venet, 2024. "When pro‐poor microcredit institutions favour richer borrowers: A moral hazard story," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(1), pages 225-242, February.
    10. Goodell, John W. & Goyal, Abhinav & Hasan, Iftekhar, 2020. "Comparing financial transparency between for-profit and nonprofit suppliers of public goods: Evidence from microfinance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).
    11. Simon Zaby, 2019. "Science Mapping of the Global Knowledge Base on Microfinance: Influential Authors and Documents, 1989–2019," Sustainability, MDPI, vol. 11(14), pages 1-21, July.
    12. Serrano-Cinca, Carlos & Gutiérrez-Nieto, Begoña, 2014. "Microfinance, the long tail and mission drift," International Business Review, Elsevier, vol. 23(1), pages 181-194.
    13. Gutiérrez-Nieto, Begoña & Serrano-Cinca, Carlos, 2019. "20 years of research in microfinance: An information management approach," International Journal of Information Management, Elsevier, vol. 47(C), pages 183-197.
    14. Sara Biancini & David Ettinger & Baptiste Venet, 2021. "When Pro-Poor Microcredit Institutions Favor Richer Borrowers - A Moral Hazard Story," CESifo Working Paper Series 8893, CESifo.
    15. Janda, Karel & Zetek, Pavel, 2014. "Mikrofinanční Revoluce: Aktuální Kontroverze A Výzvy [Microfinance Revolution: Recent Controversies And Challenges]," MPRA Paper 54098, University Library of Munich, Germany.
    16. D’Espallier, Bert & Hudon, Marek & Szafarz, Ariane, 2013. "Unsubsidized microfinance institutions," Economics Letters, Elsevier, vol. 120(2), pages 174-176.
    17. Niels Hermes & Marek Hudon, 2018. "Determinants Of The Performance Of Microfinance Institutions: A Systematic Review," Journal of Economic Surveys, Wiley Blackwell, vol. 32(5), pages 1483-1513, December.
    18. Piot-Lepetit, Isabelle & Nzongang, Joseph, 2014. "Financial sustainability and poverty outreach within a network of village banks in Cameroon: A multi-DEA approach," European Journal of Operational Research, Elsevier, vol. 234(1), pages 319-330.
    19. Brière, Marie & Szafarz, Ariane, 2015. "Does Commercial Microfinance Belong to the Financial Sector? Lessons from the Stock Market," World Development, Elsevier, vol. 67(C), pages 110-125.
    20. Kara, Alper & Zhou, Haoyong & Zhou, Yifan, 2021. "Achieving the United Nations' sustainable development goals through financial inclusion: A systematic literature review of access to finance across the globe," International Review of Financial Analysis, Elsevier, vol. 77(C).

    More about this item

    Keywords

    Microcredit; Market Share; Product and Provider Characteristics of Microcredit;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imb:wpaper:7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jabeer Al Sherazy (email available below). General contact details of provider: https://edirc.repec.org/data/inmifbd.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.