TITLE:
Market Structure and Performance of Microfinance in the Western Economic and Monetary Union (WAEMU)
AUTHORS:
Drissa Silué, Eric Kokola Kouadio, Vadoua Bamba
KEYWORDS:
Market Structure, Performance, GCM, Quantile Regression, UEMOA
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.13 No.4,
December
10,
2024
ABSTRACT: The microfinance institution (MFI) sector in the WAEMU, although growing rapidly and crucial for financial inclusion and poverty reduction, remains marked by complex dynamics. The main objective of this study is to analyse the effect of market structure on the performance of microfinance institutions in WAEMU countries. It focuses on seven WAEMU countries (Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal and Togo) over the period from 2016 to 2022. We apply generalised least squares (GLS) methods and quantile regression to panel data from the BCEAO database for the year 2023. The GCM results show that there is a positive and significant relationship between market concentration and MFI performance. On the other hand, the quantile regression method also indicates that concentration has a greater influence on the performance of MFIs when they are already very efficient. Furthermore, credit, liquidity and penetration ratios also have a significant and positive impact on performance, while the rate of portfolio deterioration has a negative influence. The authorities need to strengthen regulation and supervision to limit the risk of over-indebtedness, while improving the financial education of borrowers. It is also crucial to diversify MFI lending to better meet the needs of different sectors and regions.