City Research Online ***TEST***

Abstract

This paper examines how the entry of commercial lenders transforms microfinance markets, focusing on borrower outcomes and market-wide spillovers. Using detailed credit registry data, we show that increased competition improves loan terms for both graduating and staying borrowers, generating sustained benefits. Our setting also allows us to document what happens when entry fails and entrants retreat following a crisis. Despite increasing defaults, borrowers who graduate to banks experience long-term gains, particularly through lower borrowing costs. Our findings highlight the broader benefits and risks of fostering competition in microfinance, providing valuable insights for policymakers and financial inclusion initiatives.

Publication Type:	Article
Additional Information:	This is the accepted manuscript of an article published by CUP in Journal of Financial and Quantitative Analysis (JFQA), available at: https://doi.org/10.1017/S0022109025101865. © The Author(s), 2025. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School Bayes Business School > Faculty of Finance
SWORD Depositor:	Symplectic Administrator

Export

Downloads