Are Competitive Microfinance Services Worth Regulating? Evidence from Sub-Saharan Africa

Karimu, Amin and Salia, Samuel and Hussain, Javed G. and Tingbani, Ishmael (2019) Are Competitive Microfinance Services Worth Regulating? Evidence from Sub-Saharan Africa. International Journal of Finance and Economics. ISSN 1076-9307 (In Press)

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Abstract

In recent years there is increasing appetite for regulation of financial institutions after the 2008 financial crisis. Policy questions such as whether competitive micro finance institution (MFI) requires strong regulation to reduce, for example credit risk or competition and regulation operate in the opposite direction, which each tends to dampen the effect of the other, is an empirical issue that this paper provide answers based on data on Sub-Saharan Africa (SSA) for the period 1995 to 2015, utilizing panel data approaches. Finding from the study indicates that competition increases credit risk among MFIs in SSA, which regulation helps reduce such behaviour. The effect of regulation on credit risk is conditional on the level of competition, at the first percentile of competition; regulation does not reduce credit risk behaviour of MFIs, but does at competition level above the 25th percentile. Regulation on the other hand does not affect operational risk at any level of competition.

Item Type: Article
Uncontrolled Keywords: financial services; regulation; microfinance; competition; portfolio
Subjects: N300 Finance
Divisions: Faculty of Business, Law and Social Sciences > Birmingham City Business School > Dept. Accountancy and Finance
Depositing User: Javed Hussain
Date Deposited: 18 Oct 2019 10:02
Last Modified: 18 Oct 2019 10:02
URI: http://www.open-access.bcu.ac.uk/id/eprint/8131

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