Journal of Financial Services Research

, Volume 46, Issue 1, pp 1–53

Banks and Microbanks

  • Robert Cull
  • Asli Demirgüç-Kunt
  • Jonathan Morduch
Article

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 

JEL Classification

G21 

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  • Robert Cull
    • 1
  • Asli Demirgüç-Kunt
    • 1
  • Jonathan Morduch
    • 2
  1. 1.The World BankWashingtonUSA
  2. 2.New York University and Financial Access InitiativeNew YorkUSA

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