Monopolistic Microfinance Markets: A Case Study of Six Countries
Date
2011
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Haverford College. Department of Economics
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Thesis
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eng
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Haverford users only
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Abstract
As microfinance continues to expand, economic theory predicts a fall in interest rates as competition increases among microfinance institutions. However, high interest rates have prevailed and may signify the ability of microfinance institutions to exercise market power in noncompetitive markets. This paper employs data from the Microfinance Information Exchange to calculate a Panzar-Rosse statistic measuring changes in revenue with respect to changes in input prices in order to investigate the level of competition in microfinance markets in six countries across the globe. Results indicate that the microfinance markets in these countries (with the exception of Bangladesh) are not characterized by monopoly; thus, regulators may be justified in their opposition of interest rate ceiling regulations.