TITLE:
Effect of Competition and Regulation on MFIs Outcomes in India
AUTHORS:
Debapratim Purkayastha, Trilochan Tripathy, Biswajit Das
KEYWORDS:
Competition, Regulation, Microfinance, Efficiency, Outreach, Performance
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.5,
April
20,
2018
ABSTRACT: The purpose of this paper is to examine the effect of
competition and regulation on Microfinance Institutions (MFIs) outcomes in India.
Using data for 60 MFIs from the MIX Market database for a period of five years from
2008-09 to 2012-13, panel models are estimated for the empirical examinations. In
the modeling framework, constructed Lerner’s Index as competition proxy and regulate
dummy as regulatory intervention proxy are introduced as interest variables along
with the MFI specific and Macro specific control variables to examine their effect
on MFIs outcomes. The study reveals
that competition strengthens the outreach, promotes operating efficiency, deteriorates
the loan portfolio quality and adversely affects the MFIs profitability. While the
regulatory intervention creates some accommodative space for the MFI borrowers,
improves MFIs efficiency partially and dampens loan repayments and portfolio quality
and profitability via “roe” in India. Our results have also implications on MFIs,
fund provider, regulator, government and policy research practitioners. This study
contributes towards filling gap in the literature by extending the analysis of the
effect of competition and regulation on MFI outcomes to a cross-section of states
in India in a panel data framework.