micro finance and the challange of corporate market.doc

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MICROFINANCE

AND THE CHALLENGE OF A COMMERCIALIZING MARKET

Name: Marten Jan van Rijn

Exam number: 310737

E-mail address: [email protected]

!u"ervisr: #r. $. %aram&c'ev

Master ('esis) *ugust +00,

ER*!M! N$ER!(/ R((ER#*M

Erasmus !c'l Ecnmics

#e"artment Ecnmics

Master: Ecnmics and 2usiness

rgram:nternatinal Ecnmics and 2usiness !tudies

ABSTRACT

('e enrmus success micrinance in t'e "ast decades 'as caused t'e micrinance

mar4et t becme mre and mre cmmerciali5ed. 2& using "anel data mre t'en 1+00

Micrinance nstitutins 6M8s9 r t'e &ears 1,, until +00;) t'is stud& investigates

<'et'er cmmerciali5atin t'e micrinance mar4et rces M8s t serve ric'er clients) at

t'e ex"ense t'e "r) a "'enmenn ten reerred t as =missin drit8. ('e results s'<

t'at in t'e lng run) institutins <'ic' "erate n a nt-r-"rit a""rac' r institutins

<'ic' are nt regulated) serve "rer clients n average) cm"ared t M8s t'at "erate n a

cmmercial a""rac'. n t'e s'rt run t'e results s'< evidence r 'ig'er "ritabilit&

6R*9 as a result "rviding 'ig'er lans t ric'er "e"le. ( cnclude) sme evidence r

missin drit s'<ed u") '<ever t'e eect is nt ver& strng) since t'ere is n evidence r

'ig'er "ritabilit& as a result 'ig'er lans in t'e lng run.

CONTENTS



1. INTRODUCTION.................................................................................................................1

Research quest!".................................................................................................................1

A" "tr!#uct!" t! $cr!%"a"ce.........................................................................................&

'. LITERATURE RE(IE).....................................................................................................*

The!retca+ +terature............................................................................................................*

E$,rca+ +terature..............................................................................................................-

. THEOR/ AND H/0OTHESIS.........................................................................................1'

H,!thess............................................................................................................................1'

C!"ce,tua+2at!" a"# !,erat!"a+2at!"........................................................................1

&. DATA AND METHODOLOG/........................................................................................13

De,e"#e"t 4ara5+e.............................................................................................................1*

I"#e,e"#e"t 4ara5+es........................................................................................................16

C!"tr!+ 4ara5+es.................................................................................................................17

3. ECONOMETRIC ANAL/SES..........................................................................................'8

Descr,t4e a"a+ss.............................................................................................................'8

Resu+ts..................................................................................................................................'1

*. CONCLUSIONS AND DISCUSSION..............................................................................'3

C!"c+us!"s..........................................................................................................................'3

Dscuss!".............................................................................................................................'*

6. REFERENCES....................................................................................................................'7

Artc+es.................................................................................................................................'7

B!!9......................................................................................................................................'-

Re,!rts.................................................................................................................................'-

)e5stes...............................................................................................................................'-

7. A00ENDI:..........................................................................................................................8

De%"t!"s !% MFI T,es....................................................................................................8

Descr,t4e statstcs............................................................................................................1

Out,ut a"a+ses...................................................................................................................'



1. INTRODUCTION

Research quest!"

!ince its start in t'e 1,708s in 2anglades') micrinance 'as been ver& successul in man&

devel"ing cuntries all ver t'e <rld. Ra"idl&) micrinance "rmised t be a ver& eective

met'd reducing "vert&) <'ile n t'e same time Micrinance nstitutins 6M8s9 <ere

able t ma4e sme "rits. ('e ten called =micrinance revlutin8 'as lead t an enrmus

gr<t' t'e su""l& micrcredit. *s s'<n in igure 1) gr<t' in brr<ers and "rtli

'as been seen in all "arts t'e <rld r t'e "erid +00 until +007. n average t'e amunt

brr<ers gre< b& +> "ercent ever& &ear. 2& t'e end +00;) abut 100 millin "e"le

<ere served b& almst +00 M8s. Man& "r "e"le ever&<'ere in t'e <rld are n< able

t brr< sme mne& t start u" a business and eventuall& becme ric'er.

Figure 1 – Growth in borrowers and loan portfolio

Source: Mix Trend Lines Benchmarks 2005-2007. Data represents medians.

*lt'ug' t'e successulness and t'e gr<t' t'e micrinance mar4et in t'e "ast 3 &ears

can be seen as a ver& "sitive devel"ment) it 'as its eects n t'e structure t'e

micrinance mar4et. n t'e ne side) M8s <'ic' initiall& <ere establis'ed as Nn

?vernmental rgani5atins 6N?8s9 "erating n a nt-r-"rit basis turned int regulated

ban4s r t'er inancial institutins. n t'e t'er side) regular cmmercial ban4s are mre

and mre interested in ering micrinance services) since "rits 'ave becme "ssible.

('e successes micrinance t'erere caused t'e micrinance mar4et t becme mre

cmmercial and t'erere mre cm"etitive. ?enerall&) cm"etitin induces irms t l<er

Micrinance and t'e c'allenge a cmmerciali5ing mar4et 1



t'eir "rices) in rder t 4ee" its "lace in t'e mar4et. t can t'us be ex"ected t'at brr<ers

'ave t "a& l<er interest rates n t'eir lans due t cm"etitin in t'e micrinance mar4et.

Nrmall&) rm an ecnmic "int vie<) t'is <uld be a ver& natural "'enmenn.

<ever) it is intuitivel& ver& eas& t see t'at cm"etitin <it'in t'e micrinance mar4et

mig't 'ave an im"rtant negative eect. Namel&) due t t'is increasing cm"etitin) M8s

'ave t <r4 mre eicientl&. ('e increasing cm"etitin) mig't eventuall& rce M8s t

er t'eir services at target gru"s t'at are nt t'e "rest t'e "r an&mre. 2ecause t'eir

initial target gru" t'en carries t muc' ris4) t'e M8s <ill mre and mre cus n ric'er

target gru"s) in rder t ma4e sme "sitive) r at least n negative) "rits. ncreasing

cm"etitin mig't t'us cause a s'it rm t'e initial scial bjectives t inancial bjectives.

('e subject cmmerciali5atin t'e micrinance mar4et and its "tential cnseAuences

r t'e "r is a ver& actual t"ic. n 1,,+) t'e irst M <'ic' under<ent t'e transitin int a

cmmercial institutin <as 2anc!l) rm 2livia. n t'e &ears t'ereater) man& M8s 'ave

ll<ed 2anc!l b& c'anging rm a nt-r-"rit int a cmmercial rgani5atin and a lt

t'em are still in transitin rig't n<. nvestigating <'et'er r nt t'is "rcess 'as

im"licatins r t'e "r is great relevance) because t'e "r are t'e main reasn r

existence micrinance "rducts and institutins.

*lt'ug' t'e t"ic is ver& actual and im"rtant) t'ere 'as been ver& little em"irical

researc' n t'e eect cmmerciali5atin and "rness t'e target gru" reac'ed b&

M8s) <'ic' is generall& dented as =de"t' utreac' t t'e "r8. n a stud& using data

+; M8s rm Batin *merica) livares-lance 6+009 investigates <'et'er

cmmerciali5atin induces missin drit. e inds t'at a 'ig'er degree cm"etitin as <ell

as 'ig'er Return n *ssets 6R*9 leads t larger average lan si5es. Cull) #emirguc-%unt

and Mrduc' 6+0079 use data 1+D M8s t anal&5e <'et'er missin drit ccurs. ('e& ind

t'at M8s <'ic' mstl& "rvide individual lans 6""sed t gru" lending and village

ban4ing9 reali5e t'e 'ig'est "rits but serve t'e less "rest clients. ermes) Bensin4 and

Meesters 6+00;9 use data D3 M8s t "rvide evidence a negative relatins'i" bet<een

eicienc& and utreac' t t'e "r.

('is stud& cntributes t t'e existing literature b& an anal&sis <'ic' is based n t'e

studies "errmed b& livares-lance 6+009 and Cull et al 6+0079. 2& using "anel data

abut utreac' as <ell as inancial "errmance rm mre t'an 1+00 M8s 6starting rm

1,, until +00;9) "rvided b& t'e Micrinance nrmatin Exc'ange 6M9) t'is stud& <illanal&5e <'et'er t'e cmmerciali5atin t'e micrinance mar4et 'as cnseAuences r t'e

Micrinance and t'e c'allenge a cmmerciali5ing mar4et +



de"t' utreac' n a <rld<ide scale. Estimates abut t'e number M8s <rld<ide var&

rm abut 300 and b& t'e Micr Credit !ummit +00, until 7000 6(uc4er) Miles) +00D9. ('e

1+00 M8s used are "rbabl& nt ttall& re"resentative r t'e ttal =""ulatin8 M8s)

because t'e& all 'ave re"rted t'eir inrmatin n a vluntar& basis t t'e M) <'ic'

ma4es it mre li4el& t'at t'ese rgani5atins re"resent t'e mre =mature8 and "er'a"s mre

sustainable rgani5atins. <ever) t'e sam"le still includes an extensive "art t'e ttal

<rld<ide mar4et. Mrever) i an eect cmmerciali5atin becmes visible based n t'e

inrmatin t'ese institutins) "er'a"s t'e eect <ill be even strnger r =less mature8

M8s) <'ic' d nt re"rt t'eir inrmatin.

('e cntributin t'is t'esis is t'at it is based n mre recent data and man& mre

bservatin t'an earlier studies 6a lnger time s"an and mre cuntries9. n additin) t'is

stud& des nt nl& anal&5e <'et'er trends becme visible in t'e lng run) but als anal&5es

s'rt run eects as <ell.

('e central Auestin t ans<er in t'is t'esis is t'e ll<ing:

D!es c!$$erca+2at!" !% the $cr!%"a"ce $ar9et %!rce Mcr!%"a"ce I"sttut!"s

;MFI<s= t! ser4e rcher ,e!,+e> at the e?,e"se !% the ,!!r@

('is t'esis is rgani5ed in t'e ll<ing <a&. irst) a s'rt intrductin t micrinance is

given t inrm t'e reader abut t'e s"eciic c'aracteristics micrinance and mig't be

relevant r understanding t'e remainder t'e t'esis. ('ereater) an anal&sis t'e existing

t'eretical and em"irical literature n t'e subject cmmerciali5atin micrinance is

given. *ter t'is) a mre t'rug' anal&sis t'e t'er& '< cmmerciali5atin mig't aect

t'e de"t' utreac' t t'e "r <ill ll<. ('en) ater ging int detail n t'e data used) t'e

results t'e anal&ses ll<) t inall& inis' <it' t'e cnclusins and t'e remaining

discussin.




A" "tr!#uct!" t! $cr!%"a"ce

Micrinance cnsists nt nl& micrcredit) but als t'er services li4e micrsavings and

micrinsurance. <ever) t'e cus <ill be n micrcredit) since t'is is t'e mst relevant "art

micrinance r t'is stud&.

Micrinance as <e 4n< it currentl& is rted in 2anglades'. ('ere) in 1,7> t'e

ecnmist Mu'ammad /unus started ('e ?rameen 2an4 as an ex"eriment) nt 4n<ing 'e

<uld receive t'e Nbel eace ri5e 30 &ears later in +00> Fr t'eir erts t create

ecnmic and scial devel"ment rm bel<G1. /unus8 main gal <as t er lans t "r

"e"le) <' <ere cnsidered =unban4able8 b& regular cmmercial ban4s. Hit' t'ese small

lans 6micrcredit9) "r "e"le <ere given t'e ""rtunit& t start t'eir <n business) <'ic'

eventuall& mig't 'el" t'em t esca"e rm "vert&. r "e"le cannt er an& cllateral

and t'erere carr& t muc' ris4 r regular ban4s. ('e ?rameen 2an4 <as 6and still is9 able

t er t'e ver& "r lans) because t'ese lans are based n gru" lending cntracts) <'ic'

ta4e advantage t'e clse ties clients <it'in cmmunities.

('e mst im"rtant eature <'ic' ma4es gru" lending s successul is jint liabilit&. n

gru" lending) a lan is given t individuals <' belng t a gru". <ever) ever&

individual is res"nsible r re"a&ment t'e t'er gru" members. ne member deaults)

t'e t'er gru" members 'ave t "a& 'is debt. ! t'e ut"ut t'e individual members)

unctins as cllateral r t'e <'le gru". *s lng as all lans are being re"aid) all members

<ill get ne< lans. <ever) all gru" members are denied ne< lans i t'e& d nt "a&

t'e debt a deaulting ell< gru" member. n t'is <a&) jint liabilit& creates incentives t

re"a& 6because &u <uld nt li4e t let t'e t'er gru" members "a& r &ur trubles9) but

als t mnitr and 'el" t'e t'er gru" members. urt'ermre) since gru"s are establis'ed

n a vluntar& basis) clients <ill careull& select res"nsible and reliable gru" members.

2eside jint liabilit&) t'ere are sme t'er eatures <'ic' cntribute t t'e success

micrcredit. ne t'em invlves t'e creatin d&namic incentives via t'reatening t

exclude deaulters rm uture lans and via ="rgressive lending8. ('e latter means t'at

clients start <it' ver& small lans) but t'e& can get bigger lans ater successull& re"a&ment

"revius credit. $ia "rgressive lending) t'e lender als builds u" sme useul inrmatin

abut t'e clients8 reliabilit&.

urt'ermre) reAuent re"a&ment sc'emes "la& an im"rtant rle. n micrinance it is nt

unusual t start <it' t'e irst re"a&ment just ne <ee4 r ne mnt' ater t'e initial1 !urce: 'tt":IInbel"ri5e.rgInbel"ri5esI"eaceIlaureatesI+00>Iindex.'tml

Micrinance and t'e c'allenge a cmmerciali5ing mar4et D



disbursement) and t'en cntinue re"a&ment in <ee4l& r mnt'l& installments. n t'is <a&)

lenders are <arned sn i brr<ers are 'aving re"a&ment diiculties. 2eside) reAuent

re"a&ment "revents 'use'lds rm s"ending t'e mne& n t'er t'ings. reAuent

re"a&ment sc'emes t'us ma4e it easier r brr<ers t stic4 t t'eir cntract.

inall&) a remar4able act is t'at at t'e end +00+) , "ercent ?rameen8s clients <ere

<men. emale brr<ers seem t be muc' mre reliable t'an male brr<ers) as t'e& are

ten ll<ing mre cnservative investment strategies. urt'ermre) t'e scial im"act

seems t be bigger <'en lending t <men) since <men are verre"resented amng t'e "r

and <men are li4el& t be mre <rried abut t'e 'ealt' and educatin t'eir c'ildren t'an

men. ('erere) man& M8s target t'eir credit s"eciicall& at <men.

Figure 2 – Number of MFI’s and borrowers (millions) per region

Source: The MI - !on"a#e"$ %drian &200'(

*ter t'e successes ('e ?rameen 2an4 in 2anglades') micrinance 'as s"read ver&

ra"idl& arund t'e glbe. * recent stud& 6?n5ale5) *drian) +00;9 ('e Micrinance

nrmatin Exc'ange 6M9) based n data rm t'e M) t'e Micrcredit !ummit

Cam"aign 6MC!9 and t'e nter-*merican #evel"ment 2an4 6*#29) re"rted t'at +D+0 are

serving abut ,,.D millin clients <rld<ide currentl&) as s'<n in igure ++.

+ ('e actual number M8s mig't be muc' 'ig'er) since t'e abve igures nl& include t'e M8s <'ic'

re"rted vluntar& t t'e t'ree rgani5atins. n t'e t'er 'and) t'e number clients is li4el& t be l<er)

since it is 4n<n t'at t'ere are brr<ers 'aving multi"le lans rm mre t'an ne M.

Micrinance and t'e c'allenge a cmmerciali5ing mar4et



'. LITERATURE RE(IE)

('e discussin n t'e eects cmmerciali5atin n de"t' utreac' in t'e micrinance

mar4et is a relativel& ne< ne) mainl& because t'e t"ic <as sim"l& nt relevant bere. !ince

its start in t'e 1,708s) mdern micrinance 'as 'eavil& relied n subsidies and lans against

l< 6bel< mar4et9 "rices. Crediting t'e "r t start u" t'eir <n business 'as mainl& been

t'e ield nt-r-"rit rgani5atins. Bending mne& t extremel& "r "e"le 'as lng

been t ris4& in t'e e&es regular inancial institutins) since t'e& cannt er an&

cllateral.

<ever) since 2anc!l transrmed int a r-"rit institutins in 1,,+) mre and

mre regular cmmercial ban4s and inancial institutins 'ave s'<n interest in ering

micrinance services) <'ic' gave rise t increasing cm"etitin and cmmerciali5atin. ne

reasn r t'is increased interest culd be t'at ering micr inancial "rducts gives a

cmmercial institutin a <a& t s'< t'eir cr"rate scial res"nsibilit&) <'ic' 'as becme

increasingl& im"rtant. <ever) t'e act t'at "rits rm micrinance investments are mre

and mre "ssible culd be an even mre signiicant reasn r cmmercial rgani5atins t

get invlved in micrinance.

('e remainder t'is c'a"ter <ill be divided in t< "arts. irst) a t'eretical rame<r4

based n earlier literature arund t'e t"ic cm"etitin and cmmerciali5atin <ill be

devel"ed. *ter t'at) a discussin t'e relevant "revius em"irical literature <ill ll<.

The!retca+ +terature

C'risten 6+0009) anal&ses cmmerciali5atin and <'et'er missin drit 6invluntar& driting

a<a& rm t'e initial missin reducing "vert&9 ccurs in t'e Batin *merican mar4et r

micrinance) b& using data mre t'an +00 M8s <'ic' are active in t'is regin.

*ccrding t C'risten) <' <as ne t'e irst t address t'e t"ic =cmmerciali5atin8 in

micrinance) a cmmercial a""rac' cnstitutes t'ree main "rinci"les) <'ic' are

"ritabilit&) cm"etitin and regulatin.

M8s in Batin *merica belng t t'e mst "ritable M8s <rld<ide. ('e average

return n assets Batin *merican <as 1.D "ercent) <'ile t'e average return all t'e

institutins in t'e <rld tget'er <as -D. "ercent in t'e same "erid 61,,>-1,,,9.

Cm"etitin is t'e secnd 4e& eature cmmerciali5atin and bt' t'ese variables

encurage eac' t'er. n t'e ne 'and mre and mre "la&ers enter t'e mar4et as "sitive

returns 'ave "rven t be a realistic "tin in micrinance. n t'e t'er 'and) asmicrinance activit& increases) it als gets mre attentin as a tl t alleviate "vert&)

Micrinance and t'e c'allenge a cmmerciali5ing mar4et >



s"urring gvernments t devel" mre micrinance "rgrams) <'ic' leads t even mre

cm"etitin.

*s a result increased cm"etitin) t'e mar4et ma& reac' a s-called saturatin "int.

*t t'is "int) M8s are cm"eting r t'e same clients. C'risten s'<s an exam"le t'e

2livian mar4et) <'ic' is 'ig'l& saturated. n 1,,,) t'e estimated mar4et "enetratin rate <as

1>3 "ercent. ('is igure <'ic' is calculated b& t'e number utstanding lans as a

"ercentage t'e estimated mar4et si5e indicates t'at man& clients are ta4ing mre t'an ne

lan simultaneusl& rm mre t'an ne M. *s a result t'is) numerus clients 'ave

becme ver-indebted and 'ave t inance ne lan <it' t'e t'er. Cnsidering t'e l< lan

delinAuenc& levels initiall&) t'is is a rigrus d<nturn r t'e micrinance mar4et and leads

t degraded lan "rtli Aualit&.

H'ile in t'e "ineering stage micrinance) M8s agreed n nn-cm"ete

agreements) b& se"arating mar4ets and neig'br'ds) t'is cartel be'avir 'as made "lace r

nrmal cm"etitive be'avir. ('is generall& means t'at irms 'ave t be creative in ering

ne< and better "rducts and im"rve eicienc& in rder t be able t serve at mre

cm"etitive 6l<er9 "rices. n Batin *merica) t'is leaded t t< devel"ments: irst) ver t'e

"ast decade) t'ere 'as been a s'it rm gru" lending t<ards individual lans) relecting

clients8 "reerences. n +000) t'e individual a""rac' accunted r abut ,0 "ercent t'e

C'ilean micrinance mar4et. !ecndl&) in rder t ma4e t'is mve t<ards individual lans

"ssible) M8s 'ave been innvative in devel"ing ne< tec'niAues li4e credit card services)

cm"uter-based credit scring mdels and "rductin credit r t'e agriculture sectr. * t'ird

devel"ment t'at culd be ex"ected is "rduct diversiicatin. <ever it <uld be

reasnable t ex"ect M8s t er t'eir clients a brader range inancial services) ering

credit is still t'e main activit& mst t'e M8s.

Cmmerciali5atin is t'irdl& c'aracteri5ed b& t'e increasing number regulated

""sed t nn-regulated institutins. Regulated M8s cnsist t'ree gru"sK irst t'ere are

inancial N?8s <'ic' are transrmed int licensed M8s and are <r4ing under t'e same

legal structure as regular ban4s r inancial institutins. ('e secnd gru" are =s"eciall&

licensed M8s8 and cnsists credit unins and lcal nn-ban4 intermediaries. ('ese

institutins became licensed under a s"ecial la< r micrinance in stead t'e general

ban4ing la<. ('e t'ird 6and largest in Batin *merica9 gru" are traditinal ban4s and inance

cm"anies. ('e act t'at regular cmmercial institutins n< 'ave started t "erate in t'e

micrinance mar4et is a 4e& eature increasing cm"etitin.




Nn-regulated M8s cnsist N?8s t'at did nt 6&et9 transrm int a licensed institutin

and mstl& <r4 n a nt-r-"rit basis. n +000) 3; "ercent t'e Batin *merican M8s

<ere regulated 6reac'ing 3 "ercent t'e clients9K <'ile in 1,, virtuall& all clients <ere

reac'ed b& unregulated institutins. ('ese igures indicate t'at t'e cmmerciali5atin "rcess

is running ver& ast in Batin *merica. urt'ermre) sustainabilit& is a reAuired "recnditin

r being licensed. ('erere it can be assumed t'at regulated M8s 'ave alread& ad"ted a

cmmercial a""rac'.

* cnseAuence a cmmercial a""rac' culd be t'at it drives institutins t cus n

ric'er target gru"s. ! due t cmmerciali5atin) "rer clients mig't be let be'ind.

C'risten s'<s t'at regulated M8s n average "rvide larger lans 6L;03 r D7.+ "ercent

?# "er ca"ita9 t'an d unregulated institutins 6L3++ r +3.> "ercent ?# "er ca"ita9)

<'ic' culd be evidence t'at missin drit ccurs due t cmmerciali5atin.

<ever) accrding t C'risten) larger lan si5es d nt necessaril& re"resent missin

drit. * larger average lan si5e culd be a result a c'ice r a dierent strateg&. r

exam"le man& t'e establis'ed Batin *merican M8s did nt 'ave t'e bjective reducing

"vert& b& reac'ing t'e "rest t'e "r. nstead t'e& <anted t "rmte small enter"rise

devel"ment) in rder t create em"l&ment. *nt'er reasn r a 'ig'er average lan

balance culd be t'at lans becme mre mature. Clients usuall& start <it' ver& l< lans

and ater successul re"a&ments) lans increase graduall& as als t'e si5e t'e micr

enter"rises gr<s.

Mcnts' and H&dic4 6+009 'ave devel"ed a t'eretical mdel t anal&5e '< cm"etitin

aects t'e structure t'e micrinance mar4et. n t'ere mdel t'ere are t< dierent lenders

mne&. n t'e ne 'and t'ere are sciall& mtivated nt-r-"rit M8s. ('ese lenders

maximi5e t'e numbers clients 6breadt' utreac'9. n t'e t'er 'and) t'ere are "rit-

maximi5ing mne&lenders. ('e aut'rs s'< t'ree eects <'ic' are ex"ected t 'a""en

<it'in t'e rame<r4 2ertrand cm"etitin.

irst) in a situatin <it'ut grant unding) t'e nl& <a& t reac' t'e "r is t crss-

subsidi5e bet<een t'e "l brr<ers. ! t'at in act t'e mre "ritable brr<ers "a& r

t'e lans t'e "r deaulting brr<ers. <ever t'e abilit& t crss-subsidi5e reduces

<'en cm"etitin enters. *s a result) t'e "rest 6"tentiall& least-"ritable9 brr<ers dr"

ut t'e mar4et.

Micrinance and t'e c'allenge a cmmerciali5ing mar4et ;



!ecndl&) a situatin <'ere nl& ne M is unded b& untargeted subsidies) <'ile t'e t'er

lender gets n subsidies at all) can cause t'e subsidi5ed M t ca"ture t'e mre "ritable

clients t'e mar4et. ('erere) n cm"etitin <ill arise at all.

('irdl&) i subsidies are targeted 6<'ic' means t'at t'e& are ex"licitl& meant t und t'e

lans t'e "rer client9) cm"etitin in t'e micrinance mar4et is "ssible) <'ile still at

least sme t'e "r <ill receive lans.

*nt'er eect cm"etitin studies b& Mcnts' and H&dic4 cmes rm as&mmetric

inrmatin bet<een M8s) <'ic' is li4el& t increase i t'e amunt lenders increases as

<ell. ('e act t'at is becmes mre diicult r M8s t s'are t'eir inrmatin abut clients

creates incentives r brr<ers t ta4e mre t'an n lan simultaneusl&. ('is <ill l<er

re"a&ment rates and result in less avrable lan cntracts r all brr<ers. n t'e end t'e

"rest brr<ers <ill be <rse because t'e& are dr""ed ut t'e mar4et again.

* e< im"rtant "lic& im"licatins arise rm t'e mdel Mcnts' and H&dic4. ('e

irst suggestin is t'at a cm"etitive mar4et <'ere inanciall& sel-suicient M8s as <ell as

subsidi5ed M8s "erate tget'er is "ssible and "reerable. ('e nl& restrictin is t'at t'ese

subsidies are targeted ex"licitl& at t'e "tentiall& least "ritable 6"rest9 brr<ers.

<ever) in "ractice it is 'ard t mnitr <'et'er a client <ill be "ritable r nt) t'e mst

"ractical <a& <uld be t subsidi5e in a gegra"'ical <a&. nl& t'e "r) nt &et served

areas are subsidi5ed) cm"etitive mar4ets <ill 4ee" untuc'ed. *nt'er "tin is t subsidi5e

nl& certain met'dlgies <'ic' are nt attractive r ric'er r "ritable brr<ers) r

exam"le jint liabilit& lending cntracts <it' t&"ical small lans and 'ig' rgani5atin csts.

E$,rca+ +terature

livares-lance 6+009 "errms regressin anal&ses using data +; Batin *merican M8s

t test r sme C'ristens 6+0019 cnclusins. livares-lance uses several alternative

measurements t'e *verage utstanding Ban 6*B9) re"resenting a "rx& r de"t'

utreac') as de"endent variable. 2eside t'e abslute value *B) t'e aut'r uses t'e *B

as a "ercentage ?# "er ca"ita t'e "rest +0 6*BIC?#+09) t ta4e incme

ineAualit& dierences int accunt. *s a t'ird de"endent variable) livares-lance uses t'e

variable =L-&ears lanIL-&ears incme t'e "rest Auintile8. ('e latter variable ta4es t'e

average term t maturit& lans int accunt.

livares-lance tests r t'e t&"e institutin 6N? r nt9) age) sustainabilit&

6measured b& t'e return n assets 6R*9) breadt' 6number active brr<ers9) cm"etitin6measured b& t'e level "rtli cncentratin) <'ic' is t'e mar4et s'are t'e ur largest

Micrinance and t'e c'allenge a cmmerciali5ing mar4et ,



M8s a cuntr&9) gender and credit met'dlg& 6individual lans as a "ercentage all

t'e lans9.

n t'e mdel using t'e *B) livares-lance des nt ind an& signiicant results.

<ever) in t'e t'er t< mdels 6*BIC?#+0 and =L-&ears lanIIL-&ears incme

t'e "rest +09) signiicant results r t'e variables age) sustainabilit& 6R*9 and

cm"etitin a""eared. ('e results indicate t'at t'e age t'e institutin suggests a negative

relatins'i": lder M8s 'ave l<er lan si5es) <'ic' cntradicts <it' ex"ectatins.

<ever t'e cm"etitin ceicient) measured b& mar4et s'are) indicates t'at l<er

cm"etitin leads t l<er lan si5es. !) mre cm"etitin <uld lead t larger lan si5es)

because M8s are l4ing r mre "ritable clients. inall&) t'e sustainabilit& ceicient)

measured b& Return n *ssets 6R*9 suggests t'at a trade bet<een "ritabilit& and de"t'

utreac' des exist.

Cull) #emirguc-%unt and Mrduc' 6+0079 use a database 1+D M8s in D, cuntries t

anal&5e <'et'er t'ere is evidence r t'e trade bet<een utreac' t t'e "r and

sustainabilit&. urt'ermre t'e& Auestin <'et'er =missin drit8 'as ccurred.

Cull et al. use t'ree de"endent variables t measure utreac'. irst) t'e average lan si5e as a

ractin ?# "er ca"ita. !ecndl& t'e& use t'e average lan si5e as a ractin ?# "er

ca"ita t'e "rest +0) because due t 'ig' ineAualit& in sme cuntries) t'e nrmal ?#

"er ca"ita mig't nt give a realistic vie< t'e brr<ers8 incmes. ('irdl& t'e& use t'e

"ercentage <men brr<ers as a measure utreac') because <men are ten "rer

t'an men.

!im"le crrelatins d nt give an& signiicant results r t'e abve mentined Auestins.

<ever t'e aut'rs 'ave disaggregated t'e data based n t'ree lending met'ds) <'ic' are

individual lending) gru" lending and village ban4ing. #isaggregating t'e data gave sme

ne< insig'ts. ('e& ind evidence r =reverse missin drit8 r individual lenders: 'ig'er

"rits are assciated <it' 'ig'er utreac'. <ever <'en cntrlling r si5e and age) larger

6and lder9 individual lenders tend t reac' less "r clients. r village ban4s and gru"

lenders t'ere is n signiicant indicatin r missin drit. <ever large gru" lenders scre

less n utreac' cm"ared t smaller gru" lenders.

verall) t'e results "int ut t'at institutinal design and rientatin des matter in

cnsidering trades in micrinance. $illage ban4s) <'ic' 'ave t'e strngest cus n t'e

"rest brr<ers) ace t'e 'ig'est average csts and t'e 'ig'est subsid& levels. n cntrast)




individual-based lenders earn t'e 'ig'est average "rits) but d least <ell n indicatrs

utreac' t t'e ver& "r.

ermes) Bensin4 and Meesters 6+00;9 use a sam"le mre t'an 1300 bservatins t

anal&5e <'et'er t'e trade bet<een utreac' and eicienc& M8s des exist. ('e& use a

!tc'astic rntier *nal&sis) <'ic' ma4es is "ssible cm"are cst eicienc& b& t'e csts

a =best-"ractice8 M. ermes et al. created a mdel in <'ic' t'e de"endent variable is a

measure cst ineicienc&. ('e inde"endent variables are measures utreac' and sme

cntrl variables) <'ic' als mig't 'ave an im"act n ineicienc&. ('e irst inde"endent

variable is t'e *verage Ban 2alance 6*B29 <'ic' is ex"ected t be negativel& crrelated

<it' ineicienc&. !ecndl& t'e "ercentage <man brr<ers s'uld aect ineicienc&

"sitivel&. ('irdl&) ermes et al. cntrl r t'e t&"e lan t'at t'e institutins mainl&

"rvide 6individual lans) gru" lans) village lans and all t&"es9. *nt'er cntrl variable is

t'e &ear) <'ic' is included because ineicienc& eects mig't c'ange t'rug' t'e time. ('e

last inde"endent variable is age <'ic' culd be bt' negativel& and "sitivel& related t

ineicienc&. n t'e ne 'and) mre ex"erienced M8s are ex"ected t be mre eicient.

<ever n t'e t'er 'and) &unger M8s can ta4e advantage t'e build-u" 4n<ledge 6b&

trial and errr9 lder institutins and can t'us ma4e a mre eicient start.

ermes et al. ind evidence r a negative relatins'i" bet<een utreac' and eicienc&.

M8s <it' a l<er average lan balance are less eicient) accrding t t'e aut'rs. 2eside

t'e& ind t'at M8s 'aving mre <men brr<ers as clients) are als less eicient.

urt'ermre) t'e results r t'e cntrl variables indicate t'at during recent &ears) M8s 'ave

becme mre eicient) <'ic' culd be ex"lained b& 4n<ledge s"illver eects. n additin)

cntrar& t ex"ectatins) t'e aut'rs s'< t'at gru" lenders t be mre eicient t'an

individual lenders. ('is result su""rts t'e argument t'at less inrmatinal csts are

assciated <it' gru" lending cm"ared t t'er lending met'ds. inall&) t'e age variable

cnirms t'e '&"t'esis t'at lder M8s are less eicient. Recentl& started M8s t'us ta4e

advantage t'e build u" 4n<ledge t'e M8s <'ic' started in t'e "ineering stage

micrinance.




. THEOR/ AND H/0OTHESIS

('e central Auestin t'is stud& is <'et'er cmmerciali5atin t'e micrinance mar4et

rces M8s t serve ric'er target gru"s) at ex"ense t'e "r. ('e cnce"tual mdel can

be described as ll<s:

rits Mre M8s Cm"etitin increases rits decrease Missin drit

ritabilit& 'as been a realistic "tin r M8s) Auite ast ater t'e start mdern

micrinance in 1,7>. ('erere mre M8s are encuraged t enter t'e mar4et ra"idl&. ('e

number M8s 'as gr<n b& abut D0 annuall& bet<een 1,,7 and +00+ 6*rmendari5 and

Mrduc') +009.

*s t'e su""l& micrcredit increases) t'e mar4et becmes mre mature and

cm"etitin <ill increase. Eventuall&) a certain "int saturatin <ill be reac'ed. *t t'is

"int) mst t'e "e"le ut t'e "l "tential clients are served) s M8s 'ave t ig't

r ne< clients) b& ering lans against l<er interest rates) <'ic' l<ers t'e institutins8

"ritabilit& and sustainabilit&. *nt'er cnseAuence cm"etitin is t'at sme clients <ill

ta4e multi"le lans simultaneusl& rm dierent lenders. ('is mig't l<er t'e re"a&ment

rates) because clients becme ver-indebted and t'erere l<er t'e "ritabilit& and

sustainabilit& t'e M as <ell.

*s "ritabilit& and sustainabilit& decrease) M8s 'ave t drive d<n csts t sta&

a'ead. ('erere) t'ere is less rm r crss-subsidi5atin <it'in t'e gru" brr<ers.

Eventuall&) t'is <ill rce t'e institutin t dr" t'e "rest 6mst ris4& clients9 and serve a

ric'er target gru". Ric'er clients d nt nl& carr& less ris4) but als t'e csts lending a

'ig'er lan are relativel& l<er. r exam"le) t'e administratin csts lending ten times

100 dllar cm"ared t ne lan 1000 dllar are muc' 'ig'er.

H,!thess

('e t'er& described abve in cmbinatin <it' t'e researc' Auestin t'is t'esis) leads t

t'e ll<ing '&"t'esis:

Microfinance Institutions (MFI’s) which are more commercialized, serve richer clients

compared to MFI’s which are less commercialized.

Micrinance and t'e c'allenge a cmmerciali5ing mar4et 1+



C!"ce,tua+2at!" a"# !,erat!"a+2at!"

('e '&"t'esis as described abve is nt &et a testable '&"t'esis. ('erere) t'e terms used

abve <ill s"eciied and t'e '&"t'esis <ill be transrmed int t'ree testable '&"t'eses

using measurable indicatrs.

De,th !% !utreach ('e de"t' utreac') suggest '< "r t'e clients served b& t'e M8s

are and <ill be measured b& t'e *verage Ban 2alance 6*B29 "er brr<ers) under t'e

assum"tin t'at "r "e"le ta4e smaller lans t'an less "r "e"le. ('e *B2 <ill be

divided b& t'e ?rss Natinal ncme 6?N9 "er ca"ita t crrect r incme dierences "er

cuntr&.

C!$$erca+2at!" =( cmmerciali5e8 can be described as =t a""l& met'ds business

t r "rit8) r =t ex"lit r "rit) es"eciall& at t'e ex"ense Aualit&8 3. n t'is stud&)

cmmerciali5atin <ill be reerred t as t'e "rcess t'e micrinance mar4et mving ut

t'e nt-r-"rit envirnment N?8s int a situatin <'ere micrinance is su""lied

mainl& b& rgani5atins <'ic' ta4e n a r-"rit a""rac'.

('e anal&ses <ill be "errmed using t'ree actrs <'ic' indicate <'et'er a M "erates in

a cmmercial <a&.

- ('e irst indicatr is t'e t&"e M) <'ic' can be r-"rit r nt-r-"rit. ll<ing

t'e Mix Mar4et) N?8s and Credit nins r C"eratives are cnsidered as M8s

"erating n a nt-r-"rit basis. 2an4s) Rural 2an4s and Nn-2an4 inancial

nstitutins are cnsidered as M8s "erating n a r-"rit basis.

- ('e secnd actr is variable <'ic' indicates <'et'er a M is =Regulated8) <'ic' means

t'at t'e M is iciall& licensed b& t'e gvernment. ('e Micrinance Regulatin center

deines regulatin as:

“Regulation refers to the set of government rules (including laws, regulations, and their

implementation) that appl to microfinance. It aims at overseeing the financial soundness

3 !urce: 'tt":II<<<.t'ereedictinar&.cmIcmmerciali5e




of licensed intermediaries’ !usinesses in order to prevent financial sstem insta!ilit and

losses to depositors"

*t irst sig't) t'e variable =regulated8 mig't be inter"reted as =r "rit8. <ever) rm

C'risten 6+0009 t'is turns ut nt t be t'e case. Regulated M8s cnsists t'ree gru"s:

inancial N?8s) s"eciall& licensed M8s 6credit unin8s and lcal nn-ban4

intermediaries9 and regular ban4s and inancial institutins. Regulated M8s can t'us be

"erating n a "rit as <ell as n a nt-r-"rit basis. <ever) accrding t C'risten

6+0009) sustainabilit& is mst ten a reAuirement r being licensed. ('erere it can be

assumed t'at regulated M8s 'ave ad"ted a cmmercial a""rac'.

- ('e t'ird actr cmmerciali5atin is t'e reali5ed Return n *ssets 6R*9) <'ic' is

deined as t'e =net "erating incme8 6ater tax9) divided b& t'e ="erids average assets8.

('is variable measures t'e institutins8 "rits <'ic' is "rbabl& t'e mst straig'tr<ard

evidence a cmmercial a""rac'.

N< t'e indicatrs cmmerciali5atin and de"t' utreac' are determined) t'e bel<

rmulated '&"t'eses <ill be tested:

# Microfinance Institutions (MFI’s) operating on a not$for$profit (%F&) !asis have a lower

'verage oan alance (') per !orrower than MFI’s operating on a for$profit !asis.

* MFI’s which realize lower Return on 'ssets (R+') have a lower ' per !orrower than

MFI’s realizing higher R+'.

MFI’s which are not regulated, have a lower ' per !orrower than MFI’s which are

regulated.

Micrinance and t'e c'allenge a cmmerciali5ing mar4et 1D



&. DATA AND METHODOLOG/

('e "anel data used r t'e anal&ses cmes rm t'e <eb-based database t'e M) a glbal

micrinance inrmatin exc'ange "latrm t'at ers data rm 1,, until +00; abut

1D00 M8s. nl& t'e M8s r <'ic' micrinance activit& cnsists mre t'an ,0 "ercent

t'ere ttal activit& are included in t'e anal&sis.

('e data abut t'e ?ini-ceicient and ?# "er ca"ita gr<t') used as cntrl variables

cmes rm Hrld #evel"ment ndicatrs 6H#9 database t'e Hrld 2an4.

( anal&5e <'et'er cmmerciali5atin t'e micrinance mar4et 'as negative cnseAuences

r t'e de"t' utreac') regressin tec'niAues <ill be used. ('e anal&sis is mainl& based n

t'e articles livares-lance 6+009) Cull et al. 6+0079. <ever) nt all variables are t'e

same) <'ic' <ill be ex"lained bel<.

('e de"endent variables are measures utreac' t t'e "r) <'ile t'e inde"endent

variables are actrs cmmerciali5atin t'e micrinance mar4et. 2eside) sme t'er

variables <'ic' mig't 'ave an eect n t'e de"t' utreac' are included as cntrl

variables. n additin t a mdel <'ic' anal&5es <'et'er trends ccur in t'e lng run) a mdel

is created t anal&5e <'ic' eects ccur in t'e s'rt run.

Bng run mdel:

/i)t c O P1Qi)t O j1SnQTC1)i)t O S O C n)i)tU

('e lng run mdel <ill be created t'ree times) eac' <it' t'e same de"endent variable / i)t

6*B2I?N"c9 r institutin i) at time t . Ever& t'e t'ree eAuatin 'as a dierent

inde"endent variable i)t 6<it' P1 as estimated ceicient9 re"resenting indicatrs

cmmerciali5atin 6R*) N and nregulated9.

j1Sn are t'e ceicients r t'e n cntrl variables C 6age) number brr<ers) ?ini-

ceicient and ?# "er ca"ita gr<t'9 r institutin i) at time t .

!'rt run mdel:

d6/i)t9 c O P1Q d6i)t9O j1SnQTd6C1)i)t9 OS O d6C n)i)t9U

n t'e s'rt run mdel) /i)t re"resents t'e de"endent variable 6*B2I?N"c9 r institutin i) at

time t . d re"resents t'e irst dierence r derivative t'e variable) r exam"le t'e variabled6/i)t9 is calculated as 6/i)t - /i)t-19 and s'uld be inter"reted as a c'ange in / i)t. ('e s'rt run




mdel is nl& created r t'e inde"endent variable R* and des nt re"resent a trend li4e in

t'e lng run mdel) but it s'<s <'et'er variable / is ex"ected t c'ange "sitivel& r

negativel& <'en c'anges.

t <uld nt be ratinal t create t'e same mdel r t'e inde"endent variables N and

nregulated since t'ese variables are eit'er 0 r 1 and t'en d6 i)t9 <uld be 0 r almst ever&

"int) exce"t i an institutin transrms during t'e sam"le "erid. Even in t'is case it <uld

be nt be reasnable t ex"ect an eect n t'e si5e t'e average lan) since an institutin

'as t g t a certain transitin "rcess i it transrm r exam"le rm a nt-r-"rit

institutin int a r-"rit institutin. t cannt 'ave a ttall& dierent "l clients

immediatel& t'en.

De,e"#e"t 4ara5+e

ALB/GNIpc - ('e de"endent variable t'e anal&sis is t'e =*verage Ban 2alance8 6*B29)

<'ic' is measured as t'e M8s grss lan "rtli 6in ! dllars9 divided b& t'e ttal

number brr<ers. <ever) because incme levels dier "er cuntr&) t'e average lan

si5e is measured as a "ercentage ?rss Natinal ncme "er ca"ita 6?N"c9. livares-

lance 6+009 als nrmali5es t'e average lan as a "ercentage "er ca"ita incme t'e

"rest +0 t'e ""ulatin t ta4e incme ineAualit& in accunt. <ever) due t lac4ing

data r muc' cuntries and uncertaint& abut <'et'er measurement met'ds r t'is variable

are t'e same in eac' cuntr& t'is variable is nt included. n stead) t'is stud& <ill cntrl r

ineAualit& t'e ?ini-ceicient) <'ic' <ill be ex"lained bel<.

('e *B2 is a measure utreac' under t'e assum"tin t'at t'e si5e t'e lan relects

t'e "rness t'e clients) because ric'er "e"le can ta4e 'ig'er lans t'an "rer "e"le

can. ! i ne M s'<s a 'ig'er average lan si5e cm"ared t ant'er M) t'is indicates

t'at t'e irst M is serving ric'er clients.

('e variable *B2I?N"c 'as been transrmed b& ta4ing t'e natural lgarit'm) in rder

t ma4e t'e de"endent variable nrmall& distributed.

('e average lan si5e is als used as de"endent variable b& livares-lance 6+009 and Cull

et al. 6+0079. livares-lance 6+009 als includes t'e variable =L-&ears lanIL-&ears

incme8) <'ic' ta4es t'e =average term t maturit&8 int accunt. <ever) t'is variable <as

nt included in t'is stud& because data n t'e average term t maturit& lans is nt

available. urt'ermre) t'e variable ="ercentage <men brr<ers8) <'ic' is als used b&

Micrinance and t'e c'allenge a cmmerciali5ing mar4et 1>



Cull et al. 6+0079 'as initiall& been used as de"endent variable. <ever) due t severe data

"rblems 6serial crrelatin9 t'is variable is nt included.

I"#e,e"#e"t 4ara5+es

Return on Assets – ('e irst inde"endent variable is t'e Return n *ssets 6R*9) measured

b& t'e net "erating incme 6less taxes9 as a "ercentage t'e "erid8s average assets)

indicating t'e degree "ritabilit& r sustainabilit& t'e M8s. Ex"ectatins are t'at

'ig'er returns are establis'ed b& M8s serving ric'er clients) and t'erere) a "sitive

relatins'i" bet<een R* and t'e *B2I?N"c is ex"ected) <'ic' 'as als been "rven b&

livares-lance 6+009. Measuring t'e degree sustainabilit& using R*) 'as its

limitatins accrding t livares-lance) because it des nt ta4e subsidies int accunt.

<ever) since n detailed subsid& adjusted data is available) t'e R* remains t'e best

alternative variable.

Type of institution (NFP) - ('e secnd inde"endent variable is t'e t&"e institutin) <'ic'

is included as t'e variable =Nt-r-rit8 6N9 institutinD. N?8s and Credit nins are

cnsidered as N M8s 6see list deinitins9 <'ile) 2an4s) Nn-2an4 inancial

nstitutins 6N29) Rural 2an4s and t'e categr& =t'ers8 are cnsidered as r "rit

institutins.

nstitutins <'ic' are labeled =r rit8 are ex"ected t cus n sustainabilit&) at t'e

ex"ense t'e "rest clients. ('erere) t'e variable N is ex"ected t s'< a negative

relatins'i" <it' t'e *B2I?N"c. ('is relatin <uld s'< t'at N M8s are targeting at

"rer clients) <'ile cmmercial M8s reac' less "r clients. Cull et al. 6+0079 'ave und

t'at institutinal design des "la& an im"rtant rle in t'e trade bet<een sustainabilit& and

utreac'. <ever) in t'e "revius literature n evidence 'as been und r a signiicant

relatins'i" bet<een t'e "rit status and utreac'.

Unregulte! - ('e t'ird inde"endent variable indicates <'et'er t'e institutins are regulated

r nt. *s regulated institutins are ex"ected t ll< a mre cmmercial a""rac' t'an

unregulated institutins) a negative relatins'i" bet<een t'e variable =unregulated8 and t'e

*B2I?N"c is ex"ected.

D ('e variable N is included as: N 1) 0 ('e variable =regulated8 is included as: Nt regulated 1) regulated 0




H'et'er regulated M8s serve less "r clients t'an unregulated M8s 'as nt been tested in

earlier studies. <ever) based n C'risten 6+0009 <' argues t'at regulatin is a crucial

as"ect cmmerciali5atin) t'e variable =unregulated8 <ill be included in t'e anal&ses.

C!"tr!+ 4ara5+es

Age - ('e irst cntrl variable is age) measured as t'e re"rting &ear minus t'e &ear

establis'ment t'e rgani5atin. ('e age an M can aect t'e *B2I?N"c in t< <a&s.

n t'e n 'and) lder M8s are li4el& t <r4 mre eicient) due t build u" 6trial and errr9

ex"erience. urt'ermre) t'e clients t'e lder M8s ma& 'ave devel"ed t'eir business

and t'erere reAuire 'ig'er lans. <ever) n t'e t'er 'and &unger M8s mig't gain

rm t'e existing 4n<ledge b& s"illver eects and t'erere <r4 mre eicient. Earlier

researc' 'as s'<n unclear results regarding t'e age t'e institutin. livares-lance

6+009 und a negative im"act age n t'e average lan) <'ile Cull et al. 6+0079 und t'at

lder M8s 6es"eciall& individual lenders9 tend t reac' less "r "e"le. ('erere t'e

ex"ectatins regarding t'e age variable remain ambiguus. r better inter"retatin t'e

estimated ceicient t'is variable is transrmed b& ta4ing t'e natural lgarit'm >.

Nu"#er of #orro$ers - *nt'er cntrl variable is t'e =breadt' utreac'8) measured as

number active brr<ers. ('is variable can als be seen as a measure r t'e trade

bet<een utreac' and sustainabilit&) since it is mre li4el& t'at t'e mre mature) inancial

sustainable institutins are able t build n a bigger net<r4 clients. Cull et al. 'ave s'<n

t'at larger M8s "errm better inanciall& and less n de"t' utreac') <'ile livares-

lance 6+009 did nt ind an& signiicant results r t'e ttal number brr<ers.

('erere) t'e ex"ected relatins'i" <it' *B2I?N"c is a "sitive ne) indicating t'at

=breadt' utreac'8 and sustainabilit& ges 'and in 'and. r t'e same reasn

inter"retabilit& as t'e age variable described abve) t'is variable is transrmed b& ta4ing t'e

natural lgarit'm.

urt'ermre) t< cuntr&-s"eciic cntrl variables are included) <'ic' are described bel<.

('ese variables are t'us t'e same r ever& M t'e same cuntr&.

> ('e variable =age8 is included as: ln6ageO19. Bg-transrmatin ma4es t'e numbers smaller) t'erere t'e

estimated ceicient <ill be easier inter"retable) because t'e inde"endent variable als cnsists small

6relative9 numbers. 2ecause sme M8s 'ave an age 0) t'e lg ageO1 is ta4en r all M8s.

Micrinance and t'e c'allenge a cmmerciali5ing mar4et 1;



Gini-coefficient – ('e ?ini-ceicient re"resents a measure incme ineAualit& and is a

number bet<een 0 and 100. * 0 crres"nds t ="erect eAualit&8 meaning t'at ever&ne 'as

t'e same incme and 100 meaning ="erect ineAualit&8. ('e mre incme is uneAuall&

distributed in a cuntr&) t'e mre t'e de"endent variable *B2I?N"c is biased) because t'e

"r <' ta4e micrcredit earn less t'e ?N "er ca"ita. ('erere) a negative relatins'i"

bet<een ineAualit& and t'e *B2I?N"c is ex"ected. 2eside) t'e ?ini-ceicient 'as als

been transrmed b& ta4ing t'e natural lgarit'm) t im"rve inter"retabilit& t'e estimated

ceicient.

G%P per cpit gro$t& – ('e variable ?# "er ca"ita gr<t' re"resents ecnmic gr<t'.

*s ecnmic gr<t' increases) t'e aggregate demand <ill increase and as a result mre

investment ""rtunities <ill arise. ('erere) it is ex"ected t'at gr<t' ?# "er ca"ita

'as a "sitive eect n t'e *B2I?N"c.

Micrinance and t'e c'allenge a cmmerciali5ing mar4et 1,



3. ECONOMETRIC ANAL/SES

Descr,t4e a"a+ss

('e ttal number bservatins is ,D. <ever) nl& M8s <'ic' activit& cnsists r

mre t'an ,0 "ercent micrinance) are ta4en int accunt. *ter selectin and remval a

e< utliers r t'e *B2I?#"c) D37D bservatins are included in t'e anal&ses. *n vervie<

t'e number bservatins "er &ear is given in t'e a""endix.

igure 3 describes sme basic descri"tive statistics t'e variables used in t'e anal&ses. ('e

*verage Ban 2alance 6*B29 re"resents t'e lan "rtli in ! dllars) divided b& t'e

number active brr<ers. ('e smallest lan "rvided b& t'e M8s t'e sam"le <as 7 !

dllar) <'ile t'e 'ig'est <as ,,, ! dllar. ('e *B2I?N"c stands r t'e *B2 divided b&

?rss Natinal ncme in ! dllars. ('e variable Return n *ssets 6R*9 re"resents a

measure "ritabilit& and is cnstructed b& t'e net "erating incme divided b& average

amunt assets. ('e variable age re"resents t'e age t'e M8s and is calculated as t'e

&ear re"rting minus t'e &ear establis'ment t'e M. ('e ldest M in t'e sam"le is

D7 &ears) <'ile t'e &ungest is 0. ('e variable =number brr<ers8) include t'e active

brr<ers) <'ic' are t'e brr<ers t'at currentl& 'ave ta4en a lan rm t'e M. ndividuals

'aving multi"le lans are cunted as nl& ne brr<er.

* e< variables are transrmed b& ta4ing t'e natural lgarit'm. ('erere t'e numbers

becme muc' clser t 5er and <it'in a smaller range. CnseAuentl&) t'e estimated

ceicients <ill be easier t inter"ret.

Figure 3 – es!ripti"e statisti!s

Micrinance and t'e c'allenge a cmmerciali5ing mar4et +0



Resu+ts

('e results t'e t'ree estimated lng run eAuatins and t'e s'rt run eAuatin can be und

bel<. Ever& table s'<s t'e ceicient) standard errr and t'e "rbabilit& values t'e lng

run regressin anal&sis 6at trend level9 t'e indicatr cmmerciali5atin 6R*) N r

nregulated9 n t'e *verage Ban 2alance divided b& ?rss Natinal ncme "er ca"ita

6*B2I?N"c9. ('e t'ird clumn t'e irst table s'<s t'e regressin anal&sis in <'ic' t'e

irst dierence is used r all t'e variables and indicates t'e s'rt run eects.

#able 1 $ %&' ong run model and short run model

Coefficient Std. error P-value Coefficient Std. error P-value

Constant 0.340948 0.135561 0.0119

ROA -0.03!33 0.04!196 0.6151ln"a#e$ 0.01114! 0.010005 0.653

ln"nu%&er of &orro'ers$ -0.014543 0.00343! 0.0000

ln"#ini$ -0.06145 0.0353!9 0.085

()P*c #ro't+ -0.00616 0.00365 0.0096

ln"A,(/*c"-1$$ 0.951119 0.0059 0.0000

Constant 0.0!404 0.0096 0.0000

)"ROA$ 0.35606 0.0!15 0.0000

)"ln"a#e$$ 0.38495 0.0610 0.0000

)"ln"nu%&er of &orro'ers$$ -0.364088 0.01!0 0.0000

)"ln"#ini$$ -0.58550 0.391 0.1346

)"ln"()P*c #ro't+$ 0.010303 0.088 0.!05

-statistic 6066.8!5 0.0000 95.536!3 0.0000

R s2uared 0.90589 0.16!568

R s2uared adusted 0.90438 0.165814

)ur&in atson 1.!5!5

O&servations 314! 3!9

Cross-section units "s$ !!9 686

Periods "7ears$ 13 1

,/"A,(/*c$ )",/"A,(/*c$$

('e irst table s'<s t'at in t'e lng run 6secnd clumn9 t'e =Return n *ssets8 6R*9 desnt 'ave a signiicant eect n t'e si5e t'e average lan) <'ic' im"lies t'at t'is anal&sis

des nt "rvide evidence r missin drit t ccur.

('e cntrl variable =number brr<ers8 des signiicantl& aect 6-value V 0.09 t'e

lan si5e in a negative <a&. ('is means t'at as t'e number clients gr<s) t'e average lan

balance decreases.

('e ceicient r incme ineAualit& 6?ini-ceicient9 indicates a negative eect

incme ineAualit& n t'e si5e t'e average lan 6'<ever nl& at 10 signiicance level9)




<'ic' suggests t'at M8s in cuntries <'ere incme is less eAuall& distributed) serve "rer

clients n average.

n cntrast t ex"ectatins) t'e variable =?# "er ca"ita gr<t'8 s'<s a signiicant 6-

value V 0.09 negative eect n t'e si5e t'e average lan. <ever) t'e ceicient is ver&

small 60.00>9) s t'is eect is negligible.

inall&) *B2I?N"c <it' ne lag is included. ('is variable re"resents t'e value t'e

average lan si5e in t'e "revius time "erid. ('e lagged *B2I?N"c s'<s a 'ig'l&

signiicant 6-value V 0.09 "sitive eect n t'e lan si5e) <'ic' im"lies a 'ig' degree

autcrrelatin. ('is means t'at t'e si5e t'e average lan balance r a big "art de"ends n

t'e si5e t'e lan in t'e average lan balance in t'e "revius "erid. !) i t'e *B2I?N"c

'as been 'ig' in t'e "revius "erid) it is ver& li4el& t'at t'e *B2I?N"c <ill be 'ig' as <ell

in t'e current "erid.

('e t'ird clumn table 1 s'<s <'at 'a""ens in t'e s'rt run. t s'<s t'e results a

regressin anal&sis t'e dierences all variables. ('e result r t'e variable d6R*9

s'<s signiicant 6-value V 0.09 evidence a "sitive eect n d6ln6*B2I?N"c99. ('is

result indicates t'at t'e si5e t'e average lan balance is ex"ected increase <'en

"ritabilit& increases.

urt'ermre) t'e results r t'e cntrl variable d6*ge9 s'<s a "sitive eect 6-value

V 0.09) <'ic' im"lies t'at as an institutin becmes lder) t'e& <ill "rvide larger lans.

H'en an institutin becmes lder) t'eir clients 6and t'eir micr-enter"rises9 <ill becme

lder and mre mature as <ell and t'erere t'e& reAuire larger lans.

inall&) t'e cntrl variable =number brr<ers8 signiicantl& 6-value V 0.09 aects

t'e si5e t'e lan negativel&. ('is result im"lies t'at as an M "rvides mre ne< lans)

t'e clients served becme "rer.

Micrinance and t'e c'allenge a cmmerciali5ing mar4et ++



#able 2 $ NF ong run model

Coefficient Std. error P-value

Constant 0.1043 0.0308 0.000

/P -0.0463 0.011 0.043

ln"a#e$ 0.00916 0.00943 0.331!ln"nu%&er of &orro'ers$ -0.01! 0.00350 0.0000

ln"A,(/*c"-1$$ 0.9484 0.00513 0.0000

Constant

)"/P$

)"ln"a#e$$

)"ln"nu%&er of &orro'ers$$

-statistic 9!9!.98! 0.0000

R s2uared 0.91!996

R s2uared adusted 0.91!90

)ur&in atson 1.!61596

O&servations 3506

Cross-section units "s$ 85

Periods "7ears$ 13

,/"A,(/*c$

('e results s'<n in table + re"resent t'e results t'e eects t'e inde"endent variable

Nt-r-rit 6N9 and cntrl variables n t'e si5e t'e average lan 6*B2I?N"c9.

('e t&"e t'e institutin signiicantl& 6-value V 0.09 aects t'e *B2I?N"c. ('e results

s'< t'at N institutins 'ave a l<er lan balance n average cm"ared t r-"rit

institutins.

('e cntrl variable =number brr<ers8 'as a signiicant 6-value V 0.09 negative

eect n t'e *B2I?N"c) <'ic' means t'at as t'e institutin serves mre clients) t'ese

clients becme "rer.

inall&) as als s'<ed in table 1) t'e variable cntaining a lag r t'e *B2I?N

signiicantl& 6-value V 0.09 aects t'e si5e t'e average lan) <'ic' "ints at a 'ig'

degree autcrrelatin. t means t'at t'e *B2I?N"c in t'e current "erid is mainl&de"endent n t'e *B2I?N"c in t'e "revius "erid.




#able 3 $ *nregulated ong run model

Coefficient Std. error P-value

Constant 0.30136 0.13531 0.060

nre#ulated -0.0!0934 0.01330 0.0000

ln"a#e$ 0.013441 0.0100! 0.181ln"nu%&er of &orro'ers$ -0.018881 0.003601 0.0000

ln"#ini$ -0.04018! 0.035551 0.584

()P*c #ro't+ -0.0050!3 0.0043 0.03!1

ln"A,(/*c"-1$$ 0.93404 0.005633 0.0000

Constant

)"nre#ulated$

)"ln"a#e$$

)"ln"nu%&er of &orro'ers$$

)"ln"#ini$$

)"ln"()P*c #ro't+$

-statistic 6005.616 0.0000

R s2uared 0.91!5!

R s2uared adusted 0.91!419

)ur&in atson 1.!!1634

O&servations 344

Cross-section units "s$ !5!

Periods "7ears$ 13

,/"A,(/*c$

('e results s'<n in table 3 "rvide t'e results r t'e variable =nregulated8 and cntrl

variables n t'e si5e t'e average lan 6*B2I?N"c9. *s s'<n in t'e secnd clumn) t'e

variable =unregulated8 'as a signiicant 6-value V 0.09 negative eect n t'e si5e t'e

average lan. ('is result indicates t'at M8s <'ic' are nt regulated "rvide lans t "rer

"e"le cm"ared t regulated M8s.

('e cntrl variable =number brr<ers8 again signiicantl& 6-value V 0.09 aects

t'e *B2I?N"c in a negative <a&) <'ic' suggests t'at larger M8s serve "rer clients n

average. *s als s'<n in table 1) t'e variable =?# "er ca"ita gr<t'8 'as a ver& small but

signiicantl& 6-value V 0.09 negative eect n t'e *B2I?N"c.

inall&) t'e lagged variable *B2I?N"c s'<s a 'ig' crrelatin <it' t'e current si5e

t'e average lan again 6-value V 0.09.

Micrinance and t'e c'allenge a cmmerciali5ing mar4et +D



*. CONCLUSIONS AND DISCUSSION

C!"c+us!"s

('e central Auestin t'is t'esis is <'et'er missin drit ccurs) t'at is <'et'er

cmmerciali5atin rces Micrinance nstitutins 6M8s9 t serve ric'er 6r less "r9

"e"le) at t'e ex"ense t'e "rest target gru".

('e results t'e "revius c'a"ter s'<ed t'at) in t'e lng run t'ere is n signiicant

eect t'e Return n *ssets 6R*9 n t'e *verage Ban 2alance as a "ercentage ?rss

Natinal ncme 6*B2I?N"c9. <ever) it des ma4e a dierence <'et'er a M ll<s a

r-"rit a""rac' r <'et'er it is regulated r nt. n t'e lng run) Nt-r-rit 6N9 and

unregulated M8s 'ave signiicantl& l<er average lan balances t'an r-"rit and

regulated M8s. !) t'ere is sme evidence r missin drit t ccur in t'e lng run.

<ever) t'e evidence is nt ver& strng) since "rits 6R*9 are nt 'ig'er <'en serving

ric'er clients. n additin) it s'uld be ta4en int accunt t'at t'e errr terms t'e anal&ses

d nt ll< a ull nrmal distributin. ('erere) t'e signiicance level t'e anal&ses

mig't nt be cm"letel& cnsistent7.

('e results t'e cntrl variable <'ic' cntained a lag t'e *B2I?N"c s'<ed t'at t'e

value t'e current average lan balance is mainl& de"endent n its <n "revius values.

Cm"ared t t'e ceicient t'is lagged variable) t'er trends und in t'e lng run are ver&

small. ('erere) it becmes mre interesting t l4 at t'e eect c'anges in t'e s'rt run.

n t'e s'rt run) t'e results s'< t'at 'ig'er "rits 6R*9 are reac'ed b& "rviding larger

lans 6t ric'er "e"le9.

('e cntrl variable =number brr<ers8 s'<ed a negative eect in t'e anal&ses t'e

lng run as <ell as in t'e s'rt run. ('ere is t'us ver& rbust evidence t'at larger M8s

"rvide smaller lans. *lt'ug' t'is is in cntrast <it' ex"ectatins and indings b& "revius

aut'rs) t'ere mig't be several reasns r t'is. r exam"le) it mig't "int at a saturatin

t'e mar4et) t'erere nl& t'e ver& "r clients reAuire ne< lans. *nt'er ex"lanatin mig't

be t'at t'e bigger institutins are able t "rvide lans t "rer "e"le) just because t'e& are

mre sustainable.

7 ('is is es"eciall& t'e case r t'e variable N) <'ic' 'as a -value 0.0D. ('e t'er variables 'ave a 'ig'er

signiicance level and are t'erere mre reliable.

Micrinance and t'e c'allenge a cmmerciali5ing mar4et +



urt'ermre) t'e variable =age8 s'<ed a "sitive signiicant eect in t'e s'rt run anal&sis.

n t'e lng run anal&ses) t'e eect is "sitive as <ell) '<ever nt signiicant. ('e results t'at

institutins "rvide larger lans as t'e& becme lder) suggest t'at institutins and t'eir

clients becme mre mature. ('e cm"anies t'e clients gr< and ater successull&

re"a&ment "revius lans) t'e& reAuire and get larger lans.

L$tat!"s

('e results rel& n t'e assum"tin t'at ric'er "e"le ta4e 'ig'er lans n average) t'an "r

"e"le. ntuitivel&) t'is is a ver& "lausible assum"tin) since ric'er 6r less "r9 "e"le are

nt li4el& t ta4e t small lans and t'e ver& "r are nt able t ta4e larger lans. <ever)

as C'risten 6+0009 "inted ut) a 'ig'er average lan balance des nt necessaril& mean t'at

missin drit ccurs. rbabl&) sme M8s are nt rced t serve ric'er clients but t'is mig't

be a c'ice) r exam"le t'e M8s <'ic' started initiall& in Batin *merica 'ad t'e bjective

t "rmte small enter"rise devel"ment) in stead reac'ing t'e "rest "e"le.

Dscuss!"

N< t'e results 'ave made clear t'at t'ere are indicatins t'at cmmerciali5atin des indeed

'ave an eect n t'e "rness t'e M8s clients) an im"rtant Auestin is <'et'er t'e

tendenc& t<ards cmmerciali5atin is reall& a t'reat r t'e "r and t'e reductin

"vert&.

n t'e ne 'and) a tendenc& t<ards 'ig'er lans 6and ric'er clients9 <uld nt be a

desirable situatin) because t'is mig't undermine t'e "rest t'e "r. Cmmerciali5atin

can rce M8s t "erate n a mre "ritable basis) even i t'is <as never t'eir intentin.

r exam"le) i gvernments decide t cut d<n subsidies) because t'e& t'in4 micrinance

'as becme a sustainable industr&. ('se M8s <'ic' 'ave nt reac'ed sustainabilit& &et)

<ill be rced t ta4e a mre cmmercial a""rac' <'ic' mig't eventuall& lead t dr""ing

t'e "rest clients. urt'ermre) cm"etitin can lead t ver-indebtedness clients)

because clients are able t ta4e multi"le lans rm dierent lenders. *gain) targeting ric'er

clients <ill sund as an a""ealing slutin t t'e inancial "rblems t'at cme re as a

cnseAuence a degraded lan "rtli.

n t'e t'er 'and '<ever cmmerciali5atin t'e micrinance mar4et is li4el& t be

ne t'e mst im"rtant reasns <'& t'e micrinance 'as gr<n s extremel& ast in t'e

"ast decades. "ritabilit& 'ad never been "ssible) micrinance <uld nt 'ave gr<n sast and "rbabl& micrinance <uld nt even exist an&mre. urt'ermre) increased

Micrinance and t'e c'allenge a cmmerciali5ing mar4et +>



cm"etitin 'as lead t innvative tec'niAues) devel"ed b& cmmerciali5ed M8s in rder

t drive d<n csts 6C'risten and #ra4e) +0019. *nt'er interesting Auestin) als addressed

b& ermes 6+00;9) is t'at it mig't be "ssible t'at cmmerciali5ed M8s 6cusing less n

utreac'9 eventuall& reali5e 'ig'er results regarding "vert& reductin at t'e macr level t'an

N?8s d. ('e reasn r t'is is t'at t'eir activities) in <'ic' mre mne& is invlved) 'ave a

greater im"act n t'e verall level t'e ecnm& a regin r cuntr&.

('e results s'uld nt be seen as an attac4 n t'e current trend cmmerciali5atin.

Mrever) cmmerciali5atin seems t be an unst""able "rcess and t'erere tr&ing t st"

it <uld nt be a realistic "tin. Nevert'eless t'e results can create a<areness abut t'e

cnseAuences cmmerciali5atin) s t'at "e"le <r4ing in t'e micrinance ield can

antici"ate n t'e cnseAuences a mre cmmerciali5ed mar4et. ('e ll<ing "lic&

recmmendatins <ill be 'el"ul r a micrinance mar4et in <'ic' cmmerciali5ed M8s

can "erate in a mar4et next t M8s <'ic' are still serving t'e "rest t'e "r.

n accrdance <it' t'e suggestins Mcnts' and H&dic4 6+009) dnrs s'uld target

t'eir subsidies s"eciicall& t lans <'ic' g t t'e ver& "r. r exam"le) b& subsidi5ing in

a gegra"'ical <a& r b& subsidi5ing nl& s"eciic lending tec'niAues 6li4e gru" lending9)

t'at generall& reac'es nl& t'e "rest clients.

('e "rblem ver-indebtedness can be vercme credit bureaus. ('ese credit bureaus)

<'ic' mnitr M8s and t'eir clients) s'uld t'en <arn t'e institutins <'en clients <ant t

ta4e mre lans rm dierent institutins. n additin) administratin deaulting clients

ma4es it easier t "revent t'em rm ta4ing uture lans rm t'er M8s.

*n interesting subject r uture researc' <uld be <'et'er cmmerciali5ed institutins

"errm better r <rse regarding "vert& reductin t'an nt-r-"rit M8s. *s alread&

mentined) since cmmerciali5ed serve ric'er clients) t'e eect n t'e ecnm& at t'e macr

level mig't eventuall& be 'ig'er t'an t'e reali5ed "vert& reductin b& M8s <'ic' 'ave a

'ig' utreac' t t'e "r.




6. REFERENCES

Artc+es

C'risten) Rbert ec4) +000. WCmmerciali5atin and Missin #rit) ('e transrmatin

micrinance in Batin *merica)G C?* ccasinal "a"er Number

C'risten) Rbert ec4 and #ebra' #ra4e) +001. WCmmerciali5atin micrinanceG)

<r4ing "a"er) Micrenter"rise best "ractices

Cull) Rbert) *sli #emirguc-%unt and Jnat'an Mrduc') +007. Winancial "errmance and

utreac': * glbal anal&sis lending micrban4sG) ('e Ecnmic Jurnal 117: 107-133

?n5ale5) *drian) +00;. W< Man& 2rr<ers and Micrinance nstitutins ExistXG

Micrinance nrmatin Exc'ange 6M9) Has'ingtn) #.C.

ermes) Niels) Rbert Bensin4 and *ljar Meesters) +00;. Wutreac' and Eicienc&

Micrinance nstitutinsG) Hr4ing "a"er) niversit& ?rningen.

livares-lance) rancisc) +00. WCmmerciali5ing Micrinance and #ee"ening

utreac'X Em"irical evidence rm Batin *mericaG) Jurnal Micrinance $lume 7

number +: D7->,

Mcnts') Craig and 2ruce H&dic4) +00 WCm"etitin and micrinanceG Jurnal

#evel"ment Ecnmics 7;: +71Y +,;

!c'reiner) Mar4) +001. W!even *s"ects Ban !i5eG) Jurnal Micrinance) $lume 3)

number +: +7-D7

(uc4er) Mic'ael) +001. Winancial "errmance selected micrinance institutins.

2enc'mar4ing "rgress t sustainabilit&G Jurnal Micrinance) $lume 3) number +: 107-

1+3

Micrinance and t'e c'allenge a cmmerciali5ing mar4et +;



(uc4er) Mic'ael and ?erard Miles) +00D. Winancial "errmance micrinance

institutins. * cm"arisn t "errmance reginal cmmercial ban4s b& gegra"'ic

reginsG) Jurnal Micrinance) $lume > number 1: D1-D

B!!9

*rmendari5 de *g'in) 2eatri5 and Jnat'an Mrduc') +00. ('e Ecnmics

Micrinance) Cambridge) M*: M( ress.

Re,!rts

!tate t'e Micrcredit !ummit Cam"aign Re"rt +00,) Micrcredit !ummit Cam"aign)

Has'ingtn) #.C.

('e Micrban4ing 2ulletin number 17) +00;. Micrinance nrmatin Exc'ange 6M9)

Has'ingtn) #.C.

('e Micrban4ing 2ulletin number 1;) +00,. Micrinance nrmatin Exc'ange 6M9)

Has'ingtn) #.C.

)e5stes

'tt":II<<<.mixmar4et.rg

'tt":II<<<.<rldban4.rg : Hrld #evel"ment ndicatrs databan4

'tt":II<<<.t'emix.rgI

'tt":II<<<.micrcreditsummit.rg

<<<.micrinanceregulatincenter.rg

'tt":IInbel"ri5e.rgInbel"ri5esI"eaceIlaureatesI+00>Iindex.'tml

'tt":II<<<.mtrans"arenc&.rgI

2ar5ela&) Jenna) +00;. W2anc!l: Missin #rit in Micrinance nstitutinsG)

'tt":II<<<.c'a.rgI+00;I0;Ibancsl-missin-drit-in-micrinance-institutins

Micrinance and t'e c'allenge a cmmerciali5ing mar4et +,

http://www.coha.org/2008/08/bancosol-mission-drift-in-microfinance-institutions/

http://www.coha.org/2008/08/bancosol-mission-drift-in-microfinance-institutions/



7. A00ENDI:

De%"t!"s !% MFI T,es

N!" G!4er"$e"ta+ Ora"2at!" ;NGO= - *n rgani5atin registered as a nn "rit r tax

"ur"ses r sme t'er legal c'arter. ts inancial services are usuall& mre restricted) usuall&

nt including de"sit ta4ing. ('ese institutins are t&"icall& nt regulated b& a ban4ing

su"ervisr& agenc&.

N!" Ba"9 %"a"ca+ "sttut!" ;NBFI= - *n institutin t'at "rvides similar services t

t'se a 2an4) but is licensed under a se"arate categr&. ('e se"arate license ma& be due t

l<er ca"ital reAuirements) t limitatins n inancial service erings) r t su"ervisin

under a dierent state agenc&. n sme cuntries t'is crres"nds t a s"ecial categr& created

r micrinance institutins.

Ba"9 - * licensed inancial intermediar& regulated b& a state ban4ing su"ervisr& agenc&. t

ma& "rvide an& a number inancial services) including: de"sit ta4ing) lending)

"a&ment services) and mne& transers.

C!!,erat4e Cre#t U"!" - * nn "rit) member-based inancial intermediar&. t ma&

er a range inancial services) including lending and de"sit ta4ing) r t'e beneit its

members. H'ile nt regulated b& a state ban4ing su"ervisr& agenc&) it ma& cme under t'e

su"ervisin reginal r natinal c"erative cuncil.

Rura+ Ba"9 - 2an4ing institutin t'at targets clients <' live and <r4 in nn-urban areas

and <' are generall& invlved in agricultural-related activities.

-ource www.mi/mar0et.org




Descr,t4e statstcs

#otal number of MFI’s and obser"ations

s O&servations

otal data&ase 10 5945

Selection: activit7 ;90< 861 44!8

Re%oval of outliers 85! 43!4

Number of obser"ations per +ear

=ear O&servations

1995

1996 13199! 34

1998 66

1999 91

000 136

001 199

00 310

003 443

004 608

005 !16

006 !4500! !06

008 305

All 43!4




Out,ut a"a+ses

)e*endent >aria&le: ,/A,()P

et+od: Panel ,east S2uares

)ate: 081809 i%e: 11:43

Sa%*le: 1995 008 AC?1 A/) A,()PPC@0 A/)

A,()PPC;0.01

Periods included: 13Cross-sections included: 85

otal *anel "un&alanced$ o&servations: 3506

>aria&le Coefficient Std. rror t-Statistic Pro&.

C 0.1043 0.030!8 3.!54339 0.000

/P -0.0468 0.011 -.0316!! 0.043

,/A( 0.009158 0.009433 0.9!0883 0.331!

,/ORRO -0.01!16 0.003499 -4.9060 0.0000

,/A,()P"-1$ 0.94835 0.005134 183.6489 0.0000

R-s2uared 0.91!996 ean de*endent var -0.99980

Adusted R-s2uared 0.91!90 S.). de*endent var 1.1!6111

S.. of re#ression 0.336988 ABaiBe info criterion 0.663885Su% s2uared resid 39!.5!63 Sc+'ar criterion 0.6!6!3

,o# liBeli+ood -1158.!90 Dannan-Euinn criter. 0.66!01

-statistic 9!9!.98! )ur&in-atson stat 1.!61596

Pro&"-statistic$ 0.000000

)ate: 081809 i%e: 11:43

Sa%*le: 1995 008 AC?1

ncluded o&servations: 3506

Autocorrelation Partial Correlation AC PAC E-Stat Pro&

F F F F 1 0.006 0.006 0.1401 0.!08

F F F F 0.01 0.01 1.6354 0.441F F F F 3 0.003 0.003 1.6681 0.644

F F F F 4 0.008 0.00! 1.884! 0.!5!

F F F F 5 0.00 0.001 1.893 0.864

F F F F 6 0.009 0.008 .1511 0.905

F F F F ! 0.006 0.005 .596 0.944

F F F F 8 0.001 0.001 .648 0.9!

F F F F 9 0.001 0.001 .680 0.986

F F F F 10 -0.00 -0.00 .89 0.994

F F F F 11 0.001 0.001 .850 0.99!

0

00

400

600

800

1G000

1G00

1G400

- -1 0 1

Series: Standardied Residuals

Sa%*le 1995 008 AC?1

A/) A,()PPC@0 A/) A,()PPC

;0.01

O&servations 3506

ean 1.35e-15

edian 0.001!10

aHi%u% .500189

ini%u% -.464485

Std. )ev. 0.336!95

SBe'ness -0.015!4

Iurtosis 1.6!550

Jar2ue-era 136!5.!!

Pro&a&il it7 0.000000

Micrinance and t'e c'allenge a cmmerciali5ing mar4et 3+





)ate: 081809 i%e: 11:56

Sa%*le: 1995 008 AC?1 A/) A,()PPC@0 A/)

A,()PPC;0.01

Periods included: 13

Cross-sections included: !!9

otal *anel "un&alanced$ o&servations: 314!


C 0.340948 0.135561 .515085 0.0119

ROA -0.03!33 0.04!196 -0.50861 0.6151

,/A( 0.01114! 0.010005 1.114136 0.653

,/ORRO -0.014543 0.00343! -4.3148! 0.0000

,/(/ -0.061450 0.0353!9 -1.!36895 0.085

()PPC(RO -0.00616 0.00365 -.590!48 0.0096

,/A,()P"-1$ 0.951119 0.0059 1!9.!353 0.0000

R-s2uared 0.90589 ean de*endent var -1.03699

Adusted R-s2uared 0.90438 S.). de*endent var 1.16!!9

S.. of re#ression 0.393!9 ABaiBe info criterion 0.619009

Su% s2uared resid 340.6610 Sc+'ar criterion 0.634!5

,o# liBeli+ood -96!.0101 Dannan-Euinn criter. 0.63841-statistic 6066.8!5 )ur&in-atson stat 1.!5!50





)ate: 081809 i%e: 1:0

Sa%*le: 1995 008 AC?1

ncluded o&servations: 314!


F F F F 1 0.05 0.05 .03!3 0.153F F F F 0.009 0.008 .694 0.3

F F F F 3 -0.000 -0.001 .!00 0.518

F F F F 4 0.004 0.004 .3095 0.6!9

F F F F 5 -0.003 -0.003 .3311 0.80

F F F F 6 0.009 0.009 .59!! 0.85!

F F F F ! 0.00! 0.00! .!556 0.90!

F F F F 8 0.00 0.00 .!!39 0.948

F F F F 9 0.001 0.001 .!80! 0.9!

F F F F 10 -0.00 -0.00 .!95 0.986

F F F F 11 0.001 0.001 .!9!1 0.993

0

00

400

600

800

1G000

1G00

- -1 0 1


Sa%*le 1995 008 AC?1


;0.01

O&servations 314!

ean 4.48e-16

edian 0.000146

aHi%u% .515619

ini%u% -.4!6861

Std. )ev. 0.39065

SBe'ness -0.005!46

Iurtosis 1.016

Jar2ue-era 1114!.14Pro&a&ilit7 0.000000

)e*endent >aria&le: )",/A,()P$


)ate: 081809 i%e: 1:06

Sa%*le: 1995 008 AC?1 A/) A,()PPC@0 A/)

A,()PPC;0.01

Periods included: 1

Cross-sections included: 686

otal *anel "un&alanced$ o&servations: 3!9


C 0.0!404 0.009559 !.!6590 0.0000

)"ROA$ 0.35606 0.0!1500 4.553931 0.0000

)",/A($ 0.38495 0.0609!5 6.3180 0.0000

)",/ORRO$ -0.364088 0.016989 -1.43048 0.0000

)",/(/$ -0.58550 0.3916 -1.49658 0.1346

)"()PPC(RO$ 0.010303 0.08!88 0.35!885 0.!05

R-s2uared 0.16!568 ean de*endent var 0.034!4

Adusted R-s2uared 0.165814 S.). de*endent var 0.309!61

S.. of re#ression 0.8916 ABaiBe info criterion 0.315189

Su% s2uared resid 189.9390 Sc+'ar criterion 0.39!5

,o# liBeli+ood -368.91! Dannan-Euinn criter. 0.30489

-statistic 95.536!3 )ur&in-atson stat 1.6!8!


Micrinance and t'e c'allenge a cmmerciali5ing mar4et 3D



)ate: 081809 i%e: 1:06

Sa%*le: 1995 008 AC?1

ncluded o&servations: 3!9


F F F F 1 0.06 0.06 1.594 0.0!F F F F -0.01! -0.018 .686 0.3

F F F F 3 0.008 0.009 .4340 0.48!

F F F F 4 0.001 0.001 .4390 0.656

F F F F 5 -0.008 -0.008 .593! 0.!6

F F F F 6 0.006 0.00! .6841 0.84!

F F F F ! 0.005 0.005 .!51! 0.90!

F F F F 8 0.00 0.00 .!641 0.948

F F F F 9 0.000 0.000 .!646 0.9!3

F F F F 10 -0.001 -0.00 .!695 0.986

0

00

400

600

800

1G000

- -1 0 1


Sa%*le 1995 008 AC?1


;0.01

O&servations 3!9

ean -1.5e-16

edian -0.004155

aHi%u% 1.6!561

ini%u% -.386!1

Std. )ev. 0.8619

SBe'ness -0.3949

Iurtosis 13.6801

Jar2ue-era 1116.51

Pro&a&ilit7 0.000000






)ate: 081809 i%e: 1:0

Sa%*le: 1995 008 AC?1 A/) A,()PPC@0 A/)

A,()PPC;0.01

Periods included: 13

Cross-sections included: !5!

otal *anel "un&alanced$ o&servations: 344


C 0.30136 0.13531 .!01 0.060

/R(,A -0.0!0934 0.01330 -5.3339 0.0000

,/A( 0.013441 0.0100!0 1.334!48 0.181

,/ORRO -0.018881 0.003601 -5.43613 0.0000

,/(/ -0.04018! 0.035551 -1.130405 0.584

()PPC(RO -0.0050!3 0.0043 -.085!!! 0.03!1

,/A,()P"-1$ 0.934040 0.005633 165.8!5 0.0000

R-s2uared 0.91!5! ean de*endent var -1.016018

Adusted R-s2uared 0.91!419 S.). de*endent var 1.1!3453

S.. of re#ression 0.33!14 ABaiBe info criterion 0.665955

Su% s2uared resid 368.0889 Sc+'ar criterion 0.6!9084,o# liBeli+ood -10!3.1!9 Dannan-Euinn criter. 0.6!0659

-statistic 6005.616 )ur&in-atson stat 1.!!1634


)ate: 081809 i%e: 1:0

Sa%*le: 1995 008 AC?1

ncluded o&servations: 344


F F F F 1 0.011 0.011 0.416 0.516

F F F F 0.0 0.0 .01!4 0.365

F F F F 3 0.005 0.005 .1059 0.551F F F F 4 0.009 0.008 .3509 0.6!

F F F F 5 0.00 0.00 .3636 0.!9!

F F F F 6 0.010 0.010 .684 0.84!

F F F F ! 0.00! 0.006 .8363 0.900

F F F F 8 0.001 0.000 .8404 0.944

F F F F 9 0.001 0.000 .848 0.9!0

F F F F 10 -0.00 -0.003 .8596 0.985

F F F F 11 0.001 0.001 .86 0.99

0

00

400

600

800

1G000

1G00

- -1 0 1

Series: Standardied ResidualsSa%*le 1995 008 AC?1


;0.01

O&servations 344

ean 1.4e-15

edian 0.004065

aHi%u% .503046

ini%u% -.491810

Std. )ev. 0.336901

SBe'ness -0.194!4

Iurtosis 1.8!84

Jar2ue-era 13184.16

Pro&a&ilit7 0.000000

Documents

micro finance and the challange of corporate market.doc