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Competitive Environment and Financial Stability in the Peruvian Microfinance System

Author

Listed:
  • Huayta, Katia

    (Superintendencia de Banca, Segurosy AFP)

  • Garcia, Antonella

    (Superintendencia de Banca, Segurosy AFP)

  • Sotomayor, Narda

    (Superintendencia de Banca, Segurosy AFP)

Abstract
This paper examines the relationship between competition and financial stability for Peruvian microfinance institutions, during the 2002-2016 period. Using the Panzar and Rosse H-statistic as well as the Boone indicator for the evaluation of competition, and the Roy Z-score as a proxy for financial stability, we find a non-linear relationship (inverted U-shaped) between competition and financial stability, which validates the Martínez-Miera and Repullo approach. Furthermore, we find that competition in the Peruvian microfinance system might increase even when market concentration increases; and, according to the H-statistic, the market structure that best fits this system is monopolistic competition.

Suggested Citation

  • Huayta, Katia & Garcia, Antonella & Sotomayor, Narda, 2018. "Competitive Environment and Financial Stability in the Peruvian Microfinance System," Working Papers 2018-005, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2018-005
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    References listed on IDEAS

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    Cited by:

    1. Giovanna Aguilar & Jhonatan Portilla, 2020. "Determinants of Market Power in the Peruvian Regulated Microfinance Sector," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 657-688, December.

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    More about this item

    Keywords

    SVARs; Competition; Panzar and Rosse H-statistic; Boone indicator; relevant market; financial stability; Z-score; microfinance;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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