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Outreach and Mission Drift in Microfinance: An Interpretation of the New Trend

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  • Maurizio Caserta

    ()
    (University of Catania)

  • Francesco Reito

    ()
    (University of Catania)

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    Abstract

    This paper presents a theoretical description of some of the recent developments in the financial programs offered by microfinance institutions (MFIs). We show that even under for-profit MFIs, there is not necessarily a crowding out of the poorest microentrepreneurs, and that MFIs may optimally choose to offer both joint liability contracts (to poor borrowers) and individual liability contracts (to wealthier borrowers).

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    File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I1-P16.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 33 (2013)
    Issue (Month): 1 ()
    Pages: 167-178

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    Handle: RePEc:ebl:ecbull:eb-12-00664

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    Related research

    Keywords: Individual liability lending; joint liability lending; outreach; mission drift; for-profit microfinance institutions;

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    1. de Aghion, Beatriz Armendariz & Gollier, Christian, 2000. "Peer Group Formation in an Adverse Selection Model," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(465), pages 632-43, July.
    2. Van Tassel, Eric, 1999. "Group lending under asymmetric information," Journal of Development Economics, Elsevier, Elsevier, vol. 60(1), pages 3-25, October.
    3. Beatriz Armendariz & Ariane Szafarz, 2009. "On Mission Drift In Microfinance Institutions," Working Papers CEB, ULB -- Universite Libre de Bruxelles 09-015.RS, ULB -- Universite Libre de Bruxelles.
    4. Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, Elsevier, vol. 60(1), pages 27-50, October.
    5. Jonathan Conning & Sergio Navajas & Claudio Gonzalez-Vega, 2003. "Lending Technologies, Competition, and Consolidation in the Market for Microfinance in Bolivia," Economics Working Paper Archive at Hunter College, Hunter College Department of Economics 213, Hunter College Department of Economics.
    6. Madajewicz, Malgosia, 2011. "Joint liability versus individual liability in credit contracts," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 77(2), pages 107-123, February.
    7. Shubhashis Gangopadhyay & Maitreesh Ghatak & Robert Lensink, 2005. "Joint Liability Lending and the Peer Selection Effect," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(506), pages 1005-1015, October.
    8. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2006. "Bank concentration, competition, and crises: First results," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125498, Tilburg University.
    9. Francesco Reito, 2011. "Unproductive Investment And Rent Extraction," Bulletin of Economic Research, Wiley Blackwell, Wiley Blackwell, vol. 63(3), pages 213-230, 07.
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