Dynamics of Market Share in Microfinance

We discuss evidences that the microcredit industry in Bangladesh has recently seen emergence of large variations in the size of the microfinance institutions (MFIs) operating in the market-- on the one hand, there are large national-level MFIs, while on the other hand, small localized MFIs operating only within the confines of a small area. Institute of Microfinance (InM) data from a survey of Pathrail union in Tangail district, a seasoned place for microcredit in Bangladesh, reveals that within the local market competition is becoming more and more intense over time between established national-level MFIs and newly emerging local-level MFIs for market shares in terms of loan amount as well as number of borrowing members. Data reveals that there is segmentation in the market where some borrowers and MFIs opt for a package of low interest rates tied with low amount of loan disbursed and some other borrowers and MFIs settle for a package of high interest rates tied with high amount of loan disbursed.