Analyzing concentration trends and market structure in Jordan's microfinance industry using the SCP approach

The scope of our study is to investigate concentration trends and analyze the market structure of Jordan’s microfinance sector, demonstrating how concentration dynamics influence sustainable development. Utilizing the gross loan portfolio as a measurement of credit market share, this study constructs the Structure Conduct Performance SCP approach measured by the Herfindahl–Hirschman Index HHI technique, and the Concentration Ratios CRs spanning a panel data of five MFIs during the period 2008–2018. Then, it examines the impact of concentration measures on social sustainability outcomes using a three regression models. The results of the HHI reveal that the Jordanian microfinance industry was moderately concentrated from 2008 to 2015, and it has recently transitioned to become highly concentrated, with the HHI reaching 25.3 percent in 2018. However, based on the CRs, the largest two and four MFIs dominate the industry, accounting for more than 60 percent and 90 percent, respectively. Moreover, our findings highlight a negative association between these concentration trends and social sustainability outcomes measured by financial development and financial market indices. Ensuring that, while large MFIs can sometimes achieve economies of scale, excessive concentration often creates barriers to sustainable development and, thus, to financial inclusion.