A DYNAMIC MODEL OF MICROLENDING IN THE DEVELOPING COUNTRIES

In this paper, we examine the contract design problem of banks that extend loans to poor borrowers and seek to maximize outreach while remaining financially sustainable. A dynamic model is developed that shows how interest rates can be determined based on information about productivity and diligence characteristics of borrowers, investment opportunities, correlation of business activities, peer monitoring costs, and social sanctions. The results indicate that relative to the traditional static models, the dynamic model explains better the current experience in individual and group lending in developing countries.


Issue Date:
2001
Publication Type:
Conference Paper/ Presentation
Record Identifier:
http://ageconsearch.umn.edu/record/20635
PURL Identifier:
http://purl.umn.edu/20635
Total Pages:
31
Series Statement:
Selected Paper




 Record created 2017-04-01, last modified 2018-01-22

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