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Microfinance and Investment: A Comparison with Bank and Informal Lending

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  • Dalla Pellegrina, Lucia
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    Abstract

    Summary Comparing the impact of different types of credit on households' investment in Bangladesh, we find that loans from microfinance institutions are likely to be channeled toward non-agricultural activities while both informal and bank lending are associated to a higher expenditure in agricultural inputs. Estimated effects are net of the differences in the amount borrowed, interest rates, and collateral. Results suggest that features which are specific to microfinance--such as tight repayment schedules and land-based eligibility rules--may reduce the suitability of this source of funds for the farming sector.

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    Bibliographic Info

    Article provided by Elsevier in its journal World Development.

    Volume (Year): 39 (2011)
    Issue (Month): 6 (June)
    Pages: 882-897

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    Handle: RePEc:eee:wdevel:v:39:y:2011:i:6:p:882-897

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

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    Keywords: microfinance banks informal lending investment;

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    Cited by:
    1. Hermes, Niels & Lensink, Robert, 2011. "Microfinance: Its Impact, Outreach, and Sustainability," World Development, Elsevier, vol. 39(6), pages 875-881, June.
    2. Weber, Ron & Mußhoff, Oliver & Petrick, Martin, 2014. "How flexible repayment schedules affect credit risk in agricultural microfinance," DARE Discussion Papers 1404, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    3. Ha van Dung, 2014. "Short-term precaution, insurance and saving mechanisms in rural Vietnam," Working Papers CIE 82, University of Paderborn, CIE Center for International Economics.

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