A Structure-Conduct-Performance Analysis of the Ethiopian Microfinance Industry
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2014-06
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Abstract
The main objectives of this study are to analyze the Structure-Conduct-Performance of the microfinance industry and measure the level of competition. In order to achieve these objectives, both descriptive and econometric analyses were carried out. In the econometric analysis, a three-stage-least-squares (3SLS) estimation method was used to estimate a model comprising two equations, each representing the structure and performance of the industry, for a sample of fifteen MFIs for years 2003 to 2011.
From the descriptive analysis, it was found that there is no form of collusion among MFIs in terms of their pricing strategies and that the sector is concentrated, with regional-government backed MFIs dominating the industry. However, competition exists between MFIs and banks in terms of saving mobilization. The findings from the econometric analysis revealed that MFI size, capital structure, average loan size and financial self-sufficiency significantly affect the market share of MFIs. Furthermore, average loan size and cost per borrower were found to significantly affect the performance of MFIs, whereas market share and yield on gross portfolio were found to have an insignificant effect on the financial performance of MFIs. The findings imply that in the microfinance industry, performance of MFIs affects market structure, while the structure of the market has an insignificant effect on market performance
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Economic Policy Analysis, Economic Policy Analysis