Location Decisions of Microfinance Institutions of Bangladesh

Wadood, Syed Naimul and Mahmoud, Chowdhury Shameem (2010): Location Decisions of Microfinance Institutions of Bangladesh.

Abstract

The microcredit programs have expanded rapidly in Bangladesh in recent times. A recent phenomenon is that a large number of small and localized micro-finance institutions are operating side by side with established national-level institutions in the local-level microfinance markets. Here we examine the recent data from the Pathrail union of the Tangail district, one of the old places of microcredit, and we find interesting features regarding entry and operations of microcredit activities. One clear finding is that large and small micro-finance institutions tend to choose economically more prospective locations as their choices of destinations and in turn do have a tendency to ignore economically less prospective regions. We specify a panel data probit regression framework and the results derived are consistent with our casual observations of the data.

• Item Type: MPRA Paper
• Language: English
• Keywords: Microcredit, Location, Entry, Random Effects Probit Estimation
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L31 - Nonprofit Institutions ; NGOs ; Social Entrepreneurship

References

Matin, I. (undated). “CGAP Note Book 1: Dimensions and Dynamics of MFI Competition in Bangladesh”, Research Brief, Consultative Group to Assist the Poor (CGAP), the World Bank, Washington D.C.

McIntosh C. et. al. (2005). “How Rising Competition Among Microfinance Institutions Affects Incumbent Lenders”, The Economic Journal, 115 (October), 987- 1004.

Microcredit Regulatory Authority (2008).“NGO-MFIs in Bangladesh: Vol. III, June 2006”, Microcredit Regulatory Authority (MRA), Dhaka

Uddin, J. (undated). “Overlapping -- a Crucial Issue of Microcredit”, Palli Karma Shahayak Foundation (PKSF), Dhaka

Zaman, H. (2004). “The Scaling-Up of Microfinance in Bangladesh: Determinants, Impact, and Lessons”, World Bank Policy Research Working Paper, 3398, September 2004, The World Bank, Washington D.C.

Mahmoud, C. S., M.A.B. Khalily and S.N. Wadood (2009), “Dynamics of Market Share in the Microfinance Industry in Bangladesh”, Institute of Microfinance Working Paper, July 2009

de Aghion, B. A. and J. Morduch (2005), “The Economics of Microfinance”, the MIT Press, Cambridge and London

Wooldridge, Jeffrey M. (2002). “Econometric Analysis of Cross Section and Panel Data”, The MIT Press, Cambridge and London