Profitability of Microfinance Institutions in Ghana: Does competition matter?

Author(s):

Chrisantus Be-Imwin Kpinye^a, Emmanuel Sarpong-Kumankoma^b and Patrick Opoku Asuming^c

bckpinye@st.ug.edu.gh / Esarpong-Kumankoma@ug.edu.gh
2024-08-01 04:29:23

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Abstract

This study investigates the effect of competition on the profitability of Microfinance Institutions (MFIs) in Ghana. We estimate the level of competition at the MFI-level for 58 MFIs nationwide. The study uses a quantitative analytical framework with unbalanced panel data covering the period 2000-2014. We adopted the generalised method of moments estimator proposed by Blundell and Bond (1998) in estimating the results. The main finding indicates that competition impacts negatively on MFIs profitability in Ghana. Also, our results suggest that size, capitalisation, debt to equity ratio, outreach (in depth and breadth) and inflation are significant determinants of MFIs profitability in Ghana.

Keywords
Microfinance Institutions; Profitability; Competition; Lerner Index; Ghana

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