Good intentions pave the way to … the local moneylender
AbstractAccess to microfinance entails a risk of over-indebtedness. A naïve present-biased micro-borrower may roll over debt after failure of an investment project financed with an MFI loan, even though she planned not to do so and would not have taken the MFI loan if she had been aware of the time inconsistency of her plan. Similarly, she may use a new loan to repay and end up over-indebted if she discounts the future too strongly relative to her true preferences.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 118 (2013)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/ecolet
Microfinance; Over-indebtedness; Hyperbolic discounting;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
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