Microfinance, competition, and growth

Abstract This paper analyzes the relationship between microfinance, competition, and growth in a sample of 119 countries over the period 1999–2018. Our results are fourfold. First, we show that microfinance increases economic growth. Second, we identify investment and consumption as the main channels explaining the positive effect of microfinance on growth. Third, our study highlights that the conventional financial sector and microfinance are substitutes and not complements in emerging and developing countries. Finally, we show that competitive microfinance markets allow increasing the positive effect of microfinance on growth.