AbstractMicrofinance 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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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Development Economics.
Volume (Year): 88 (2009)
Issue (Month): 2 (March)
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Web page: http://www.elsevier.com/locate/devec
Microfinance Repayment incentives Contagion;
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