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    Market power, social welfare, and efficiency in the Peruvian microfinance
    (Springer Science and Business Media Deutschland GmbH, 2024-04-01)
    This study quantifies the social welfare loss caused by market power in Peru’s regulated microfinance industry and analyzes its effect on microfinance institutions’ (MFIs) efficiency from 2003 to 2019. We estimate the efficiency-adjusted Lerner index as a measure of market power and obtain efficiency scores via cost and profit stochastic frontiers estimation using data from a wide panel of MFIs. Additionally, to analyze the effect of market power on the MFI’s efficiency, we estimate a fixed effects model with instrumental variables to correct the endogeneity problem. The results show that the welfare loss due to market power in Peru’s regulated microfinance industry has increased from 0.12% of GDP in 2003 to 0.27% in 2019. It is also found that market power positively affects Peruvian MFIs’ efficiency. Therefore, reducing market power leads to a welfare gain by lowering the social welfare loss (Harberger’s triangle) and a welfare loss due to decreased efficiency in MFIs. However, we find that reducing market power leads to a positive net effect on social welfare due to greater welfare gain than loss.
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    Lending rate sensitivity to monetary policy: a bank level empirical analysis
    (Emerald Publishing Limited, 2025-01-01)
    This paper evaluates how the monetary policy rate influences bank lending rates in Peru, focusing on various loan types from September 2010 to August 2022. Design/methodology/approach We utilize the Bai and Perron (1998, 2003) methodology to account for structural changes in the pass-through effect of monetary policy on lending rates. Findings Findings indicate a heterogeneous impact of monetary policy on lending rates, with larger effects during significant rate changes and heightened sensitivity post-2019 due to COVID-19. Originality/value This study is the first to investigate the effects of monetary policy on interest rates using segment and bank level data in Peru.
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