Microcredit Capital Flows and Interest Rates: An Alternative Explanation
AbstractInternational capital flows are constrained by a lack of complementary human capital, information asymmetries and transaction costs for small loan sizes. Extant research has provided a myriad of economic and cultural explanations of how microcredit has overcome these. Based on these, the paper develops a simple economic framework that accounts for these behavioral and institutional factors: a discontinuous marginal revenue curve and a U-shaped supply curve of capital for the microcredit environment. It then uses these analytical tools to explain capital flows and interest rates charged by traditional moneylenders. Finally, it uses these tools to present the growth of microcredit and the increase in financial flows and to explain why microcredit interest rates are lower than those of moneylenders, but higher than those of commercial banks to wealthier borrowers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Journal of Economic Issues.
Volume (Year): 43 (2009)
Issue (Month): 3 (September)
Contact details of provider:
Web page: http://www.mesharpe.com/mall/results1.asp?acr=jei
microfinance; poverty; moneylender; information asymmetry; development economics;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Arvind Ashta & Marek Hudon, 2009. "To whom should we be fair? Ethical issues in Balancing Stakeholder Interests from Banco Compartamos Case Study," Working Papers CEB 09-036.RS, ULB -- Universite Libre de Bruxelles.
- Arvind Ashta & Djamchid Assadi, 2009. "Does Social Lending incorporate Social Technologies? The use of Web 2.0 Technologies in online P2P lending," Working Papers CEB 09-056.RS, ULB -- Universite Libre de Bruxelles.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ian Winship) or (Chris Nguyen).
If references are entirely missing, you can add them using this form.