Effect of Competition on the Performance of Microfinance Institutions in Sub-Saharan Africa
| dc.contributor.author | Tchakounte Joséphine | |
| dc.date.accessioned | 2026-01-29T07:18:47Z | |
| dc.date.available | 2026-01-29T07:18:47Z | |
| dc.date.issued | 2026 | |
| dc.description.abstract | This study aims to analyze the effect of competition on the profitability and outreach of SSA MFIs. To achieve this objective, data were extracted from a dynamic panel of 3,105 MFI observations from the MIX market and the World Bank for the period 2000 to 2017. Applying two-stage GMM, instrument-free inference for linear regression models with endogenous regressors, pooled fixed-effects OLS and pooled random-effects OLS on these data, our results showed that competition decreases profitability (ROA and ROE) of profit-oriented and non profit MFIs. Our results also showed that competition exerts a mixed effect on the outreach (avloangni and NAB) of these institutions. However, it is important to point out the presence of a much more detrimental effect of competition on return on assets (ROA) and average loan per borrower (avloangni) for non-profit MFIs compared to that of profit-oriented MFIs. When return on equity (ROE) is considered, we observe instead a much more detrimental effect of competition on the ROE of profit-oriented MFIs compared to that of non-profit MFIs. The discovery of a positive effect of competition on the number of active borrowers (NAB) of profit-oriented and non-profit MFIs, suggest that in SSA, competition does not automatically lead to a drift in the social mission (avloangni) of MFIs, as it also enables these microfinances to increase their NAB. Given these results, policymakers in SSA countries need to improve the profitability and outreach of profit-oriented and non-profit MFIs by deploying a regulatory framework that reduces the lending rates charged in the microfinance sector. | |
| dc.identifier.uri | https://publication.aercafricalibrary.org/handle/123456789/4040 | |
| dc.publisher | AERC | |
| dc.title | Effect of Competition on the Performance of Microfinance Institutions in Sub-Saharan Africa |