{"title":"Financial sector development and microcredit to small firms","authors":"Désiré Kanga , Issouf Soumare , Hubert Tchakoute Tchuigoua","doi":"10.1016/j.intfin.2024.102063","DOIUrl":null,"url":null,"abstract":"<div><div>This article investigates the relationship between countries’ financial sector development and the loans extended to micro, small, and medium-sized enterprises (MSMEs or <em>small firms</em>) by microfinance institutions (MFIs). Using 4,801 MFI-year observations worldwide, we find a negative relationship between financial sector development and MSME lending by microfinance institutions. In other words, improvement in financial development, defined as a combination of depth, access, and efficiency, decreases micro-lending to small firms due essentially to intense competition from banks. Moreover, looking at the ownership status of microfinance institutions, we find that the intense competition between profit-oriented microfinance institutions and banks mainly drives the observed negative relationship. For nonprofit microfinance institutions, financial sector development is not significantly associated with their lending to small firms. In a less developed financial sector, microfinance institutions lend more to small firms, fulfilling their social mission.</div></div>","PeriodicalId":48119,"journal":{"name":"Journal of International Financial Markets Institutions & Money","volume":"96 ","pages":"Article 102063"},"PeriodicalIF":5.4000,"publicationDate":"2024-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of International Financial Markets Institutions & Money","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S104244312400129X","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This article investigates the relationship between countries’ financial sector development and the loans extended to micro, small, and medium-sized enterprises (MSMEs or small firms) by microfinance institutions (MFIs). Using 4,801 MFI-year observations worldwide, we find a negative relationship between financial sector development and MSME lending by microfinance institutions. In other words, improvement in financial development, defined as a combination of depth, access, and efficiency, decreases micro-lending to small firms due essentially to intense competition from banks. Moreover, looking at the ownership status of microfinance institutions, we find that the intense competition between profit-oriented microfinance institutions and banks mainly drives the observed negative relationship. For nonprofit microfinance institutions, financial sector development is not significantly associated with their lending to small firms. In a less developed financial sector, microfinance institutions lend more to small firms, fulfilling their social mission.
期刊介绍：
International trade, financing and investments, and the related cash and credit transactions, have grown at an extremely rapid pace in recent years. The international monetary system has continued to evolve to accommodate the need for foreign-currency denominated transactions and in the process has provided opportunities for its ongoing observation and study. The purpose of the Journal of International Financial Markets, Institutions & Money is to publish rigorous, original articles dealing with the international aspects of financial markets, institutions and money. Theoretical/conceptual and empirical papers providing meaningful insights into the subject areas will be considered. The following topic areas, although not exhaustive, are representative of the coverage in this Journal. • International financial markets • International securities markets • Foreign exchange markets • Eurocurrency markets • International syndications • Term structures of Eurocurrency rates • Determination of exchange rates • Information, speculation and parity • Forward rates and swaps • International payment mechanisms • International commercial banking; • International investment banking • Central bank intervention • International monetary systems • Balance of payments.
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