Travail de recherche/Working paper
| Résumé : | This article investigates the relationship between countries’ financial sector development (FSD) and the loans extended to micro, small, and medium-sized enterprises (MSMEs) by microfinance institutions (MFIs) located in those countries. Using 4,801 MFI-year observations worldwide, we find a strong negative relationship between FSD and MSME lending by MFIs. In other words, improvement in financial development, defined as a combination of depth, access, and efficiency, decreases MFI lending to MSMEs due essentially to intense competition from banks. Moreover, looking at the ownership status of MFIs, we find that the observed negative relationship is mainly caused by the intense competition between profit-oriented MFIs and banks. For nonprofit MFIs, FSD is not significantly associated with their lending to MSMEs. Overall, in the less developed financial sector, MFIs lend more to MSMEs, hence fulfilling their social mission |
