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Microfinance Competition in the Presence of Moneylenders: Theory and Evidence

Shyamal Chowdhury, Prabal Roy Chowdhury, Joeri Smits · 2026 · arXiv (Cornell University)

DOI: 10.48550/arxiv.2610.12186 · cited by 0 works (OpenAlex) · open-access PDF

Portuguese

Depois de décadas de expansão de microfinanciamento e apesar de cobrar taxas de juros mais altas, os moneylenders continuam a existir ao lado das instituições de microfinanciamento (MFI). Desenvolvemos um modelo dinâmico com risco moral ex post, no qual os mutuários usam empréstimos de MFI para produção e podem confiar em moneylenders para empréstimos de ponte após choques para pagar MFI e preservar o acesso futuro ao crédito de MFI. Então estudamos como a concorrência de MFI forma a coexistência entre MFI e moneylenders. O efeito da concorrência sobre o crédito de MFI é ambíguo: pode enfraquecer os incentivos de reembolso ou substituir os moneylenders como mutuários de ponte. Por contraste, a concorrência

Machine translation (Meta M2M100); the English original follows.

Abstract

After decades of microfinance expansion and despite charging higher interest rates, moneylenders continue to exist alongside microfinance institutions (MFIs). We develop a dynamic model with ex post moral hazard, in which borrowers use MFI loans for production and can rely on moneylenders for bridge loans after shocks to repay MFIs and preserve future access to MFI credit. We then study how MFI competition shapes the coexistence between MFIs and moneylenders. The effect of competition on MFI credit is ambiguous: it may weaken repayment incentives or replace moneylenders as bridge lenders. By contrast, competition unambiguously reduces moneylender credit. In a village-level randomized expansion in Bangladesh, stratified by baseline MFI presence, one additional MFI reduces the number of moneylender loans by roughly 30-40% two to three years later, with no detectable effect on MFI or overall borrowing. This suggests that, in markets where MFIs rely primarily on the threat of exclusion to induce repayment and moneylenders provide emergency finance, gains from additional MFI entry may be greater in less saturated areas.

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Topics: Microfinance, Competition (biology), Incentive, Economics, Monetary economics, Loan

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