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Borrower runs

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Author Info
Bond, Philip
Rai, Ashok S.
Abstract

Microfinance institutions and other lenders in developing countries rely on the promise of future loans to induce repayment. However, if borrowers expect that others will default, and so loans will no longer be available in the future, then they will default as well. We refer to such contagion as a borrower run. The optimal lending contract must provide additional repayment incentives to counter this tendency to default.

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Publisher Info
Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 88 (2009)
Issue (Month): 2 (March)
Pages: 185-191
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Handle: RePEc:eee:deveco:v:88:y:2009:i:2:p:185-191

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Related research
Keywords: Microfinance Repayment incentives Contagion;

Cited by:
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  1. Eric Van Tassel, 2009. "Moral Hazard and Capital Requirements in a Lending Model of Credit Denial," Working Papers 09003, Department of Economics, College of Business, Florida Atlantic University. [Downloadable!]
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This page was last updated on 2009-12-3.

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