Microfinance, subsidies and local externalities

Microfinance, subsidies and local externalities We analyse equilibrium borrowers’ effort and the cost of microcredit loans in the presence of moral hazard, project correlation and subsidies under group lending conditions. Our results show that under the assumption of endogenous effort, project correlation has significant effects on borrowers’ effort only when it is determined by asymmetric (positive or negative) shocks. These findings indicate that the well-known negative effect of within-group (symmetric) project correlation on group lending with joint liability disappears once endogenous effort is taken into account. We also analyse the effects of subsidised lending (and asymmetric correlation) on the relative convenience (in terms of borrowers’ effort) of the alternative (1) between group lending and individual lending with notional collateral and (2) among three different market structures of the microfinance industry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Microfinance, subsidies and local externalities

Loading next page...
 
/lp/springer_journal/microfinance-subsidies-and-local-externalities-zitSOzaJW3
Publisher
Springer US
Copyright
Copyright © 2008 by Springer Science+Business Media, LLC.
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-008-9125-y
Publisher site
See Article on Publisher Site

Abstract

We analyse equilibrium borrowers’ effort and the cost of microcredit loans in the presence of moral hazard, project correlation and subsidies under group lending conditions. Our results show that under the assumption of endogenous effort, project correlation has significant effects on borrowers’ effort only when it is determined by asymmetric (positive or negative) shocks. These findings indicate that the well-known negative effect of within-group (symmetric) project correlation on group lending with joint liability disappears once endogenous effort is taken into account. We also analyse the effects of subsidised lending (and asymmetric correlation) on the relative convenience (in terms of borrowers’ effort) of the alternative (1) between group lending and individual lending with notional collateral and (2) among three different market structures of the microfinance industry.

Journal

Small Business EconomicsSpringer Journals

Published: Jun 18, 2008

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve Freelancer

DeepDyve Pro

Price
FREE
$49/month

$360/year
Save searches from Google Scholar, PubMed
Create lists to organize your research
Export lists, citations
Access to DeepDyve database
Abstract access only
Unlimited access to over
18 million full-text articles
Print
20 pages/month
PDF Discount
20% off