nep-mfd 2016-02-12 papers

on Microfinance

Issue of 2016–02–12
one paper chosen by
Guadalupe Acra Ticona and Olivier Dagnelie, Université de Caen

Refinancing MFIs with Market Power: Theory and Evidence By Lutz G. Arnold; Benedikt Booker; Gregor Dorfleitner; Michaela Röhe

Refinancing MFIs with Market Power: Theory and Evidence

By:	Lutz G. Arnold; Benedikt Booker; Gregor Dorfleitner; Michaela Röhe
Abstract:	This paper presents a model of the complete microcredit financing chain investor MIV → MFI → micro-borrower, in which social-minded MIVs provide funds only to those MFIs which do not exploit their bargaining power towards micro-borrowers. The MFIs with the highest bargaining power do not use MIV capital, since eschewing their market power is most costly for them. Consistent with this prediction of the theoretical model, we find empirically that the net interest margin, as a measure of MFI market power, negatively affects the likelihood of using MIV finance. This lends support to the view that social criteria play an effective role in MIVs’ investment policies, thereby also impacting MFIs’ lending behavior.
Keywords:	microfinance, microfinance investment vehicles, social returns
JEL:	G21
Date:	2016–01
URL:	https://d.repec.org/n?u=RePEc:bav:wpaper:162_arnoldbookerdorfleitnerroehe

This nep-mfd issue is ©2016 by Guadalupe Acra Ticona and Olivier Dagnelie. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.

General information on the NEP project can be found at https://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.

NEP’s infrastructure is sponsored by the Griffith Business School of Griffith University in Australia.