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The limited number of existing papers that link competition among microfinance institutions (MFIs) and microcredit interest rates, provide inconclusive and counterintuitive results. This paper uses data from 1997 MFIs operating in 109 countries between the years 2003 and 2016 to construct three measures of competition and evaluate their impacts on interest rates. These measures reflect three different aspects of competition: geographical expansion, market concentration, and the marginal pricing. While the results for market concentration are inconclusive, the results for both geographical expansion and marginal pricing show an economically strong impact of competition on interest rates. Specifically, regardless of whether an MFI is a for-profit or nonprofit, we find meaningful evidence that competition reduces interest rates. Our findings evince that lower interest rates are needed if the microfinance movement is to continue to be relied on as an effective means to alleviate poverty. marginal cost (i.e. the Lerner Index). These measures give different signals on the evolution of competition over time. Although the results for market concentration seem to be inconclusive (but consistent with the nascent literature), the results for the number of branch offices and the Lerner Index show a consistent impact of competition on interest rates; specifically, increased competition reduces interest rates charged by for-profit and nonprofit MFIs.The paper proceeds as follows: Sect. 2 presents the data. Section 3 outlays the empirical model, explains the variables used, and develops alternative measures of competition. Section 4 presents the estimation methods, and Sect. 5 presents the results and discussion. Finally, Sect. 6 presents several concluding thoughts and offers policy recommendations. DataThere are more than 3000 MFIs reporting to the MIX Market. Data for MFIs date back to 1999. The MIX Market classifies MFIs into diamonds according to the availability and quality of data provided by the MFIs. Diamonds range from 1 to 5 where a higher number indicates more transparent and reliable data. To evaluate the overall impact of competition, all MFIs are included regardless of their classifications. To address the quality and availability of data, MFIs with three or less diamonds are also used, and the subsequent results were essentially the same. Data on macroeconomic variables and interest rate ceilings are gathered from the World Bank and Naimbo and Gallegos (2014), respectively.The full data set contains information on 2944 MFIs operating in 122 countries with 17,819 annual observations. Due to some missing values and data trimming, data for 947 MFIs were dropped. Therefore, the final unbalanced sample used in the empirical analysis contains information on 1997 MFIs operating in 109 countries for the period 2003-2016. The breakdown by region is 504 from Latin America and the Caribbean, 322 from South Asia, 420 from Africa, 369 from Eastern Europe and Central Asia, 315 from East Asia and the Pacific, and 67 from the M...