The Effects of Competition on the Outreach Level of Pawnshop Industry in Malaysia

The aim of this paper is to shed new light on the as yet unsolved question of whether competition is a good or bad model for microfinance markets. We empirically analyzed how the degree of competition affects the achievements of development projects promoting micro-credit. These projects usually provide subsidies to Microfinance institutions (MFIs) for capacity and institution building with a dual objective: The MFIs should be enabled to extend its loan supply for MSE (outreach to the target group) while at the same time aiming at cost coverage and profitability (financial sustainability). This paper will empirically be done to tackle the problem of how competition influences the outreach and the financial situation of MFIs. Due to our unique set of micro-data on the credit portfolio as well as on cost and revenues of competing microfinance operators in Malaysia, we are able to do this. This microfinance program directly focuses on poverty reduction by offering financial services to th