Impact of Competition on MFIs’ Outreach: A Cross Country Analysis of India and Bangladesh

The microfinance sector, of late, is featured by intense competition, driven mainly by the forces of up-scaling, downscaling and greenfield microfinance institutions (MFIs). With increased competition, the MFIs face challenges to balance sustainability with their ultimate mission to reach the poor. Against this backdrop, the present paper attempts to assess the impact of competition on social performance of MFIs in India and Bangladesh. With the help of panel data on 75 MFIs for seven years from 2009 to 2015, the study finds that competition has no significant impact on social performance of MFIs measured in terms of outreach depth and breadth. While matured MFIs are more committed to social performance of MFIs, sustainability positively and significantly influences social performance of MFIs. The analysis also reveals that there exists a statistically significant difference in the social performance (outreach breadth and depth) of MFIs operating in India and Bangladesh.