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The Microfinance Collateralized Debt Obligation: A Modern Robin Hood?

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  • Byström, Hans N.E.

Abstract

Summary The aim of this paper is to highlight a potentially very fruitful link between micro-entrepreneurs and international capital markets. It discusses the role structured finance and credit derivatives could play in extending finance to micro-entrepreneurs on a much larger scale than today's mainly non-commercial microfinance industry. The mechanisms of so-called collateralized debt obligations (CDOs) are described and extended to the microfinance world. Finally, a hypothetical, but realistic, example of such a microfinance CDO (MiCDO) is used to discuss the implications of securitization and tranching of microcredits.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 36 (2008)
Issue (Month): 11 (November)
Pages: 2109-2126

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Handle: RePEc:eee:wdevel:v:36:y:2008:i:11:p:2109-2126

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Web page: http://www.elsevier.com/locate/worlddev

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Keywords: commercial microfinance structured finance collateralized debt obligation MiCDO Asia China;

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References

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  1. Ingo Fender & John Kiff, 2004. "CDO rating methodology: Some thoughts on model risk and its implications," BIS Working Papers 163, Bank for International Settlements.
  2. Dehejia, Rajeev & Montgomery, Heather & Morduch, Jonathan, 2005. "Do interest rates matter? credit demand in the Dhaka Slums," MPRA Paper 33146, University Library of Munich, Germany.
  3. John Weiss & Heather Montgomery, 2005. "Great Expectations: Microfinance and Poverty Reduction in Asia and Latin America," Oxford Development Studies, Taylor & Francis Journals, vol. 33(3-4), pages 391-416.
  4. Bank for International Settlements, 2005. "The role of ratings in structured finance: issues and implications," CGFS Papers, Bank for International Settlements, number 23, January.
  5. Antje Berndt & Rohan Douglas & Darrell Duffie & Mark Ferguson, . "Measuring Default Risk Premia from Default Swap Rates and EDFs," GSIA Working Papers 2006-E31, Carnegie Mellon University, Tepper School of Business.
  6. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  7. Richard L. Meyer, 2002. "The demand for flexible microfinance products: lessons from Bangladesh," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(3), pages 351-368.
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Citations

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Cited by:
  1. Mader, Philip, 2011. "Making the poor pay for public goods via microfinance: Economic and political pitfalls in the case of water and sanitation," MPIfG Discussion Paper 11/14, Max Planck Institute for the Study of Societies.
  2. Dorfleitner, G. & Priberny, C., 2013. "A quantitative model for structured microfinance," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(1), pages 12-22.
  3. Byström, Hans, 2007. "Structured Microfinance in China," Working Papers 2007:18, Lund University, Department of Economics.

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