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The effect of competition on sustainability of Ecuadorian MFIs. Do MFIs compete with commercial banks?

par Naranjo Galindo, Fernando
Président du jury Labie, Marc
Promoteur Vanroose, Annabel
Publication Non publié, 2021-08-25

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Résumé :

Competition is often considered an important factor to enhance efficiency in the process of resource-allocation which could drive innovation and result in better quality of products and services. However, it could also put at risk the sustainability of firms operating within certain industries such as the financial sector. This could have further managerial implications when it comes to social enterprises such as microfinance institutions (MFIs). Using data from Superintendencia de Economía Popular y Solidaria and Superintendencia de Bancos over the period 2016-2020, this study aims at analyzing the aspects of competition on sustainability of Ecuadorian MFIs. More specifically, the research focuses on savings and credit cooperatives (SACCOs). Relying on both the structural and non-structural approach to measure competition at a firm level, findings are in line with an important portion of the microfinance literature in the sense that competition has a negative impact on the main measures of financial sustainability and portfolio quality. In addition, results show that despite operating in the same markets and offering similar credit products MFIs and commercial banks serve different types of clients. Finally, and perhaps more strikingly, outcomes suggest that commercial banks are serving poorer clients than the analyzed MFIs in Ecuador.