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The use of village agents in rural credit delivery

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  • Gabriel Fuentes
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    Abstract

    Using a simple principal-agent model this article examines the incentive problems that arise when a formal financial institution (such as a rural bank) utilises a member of the rural community to act as an agent in screening potential borrowers and collecting repayment. Optimal compensation schemes are derived for the agent and their implications are discussed. In addition, I show that the norms and rules that govern village life may aid the financial institution by helping to constrain possible strategic behaviour by the agent.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00220389608422462
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

    Volume (Year): 33 (1996)
    Issue (Month): 2 ()
    Pages: 188-209

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    Handle: RePEc:taf:jdevst:v:33:y:1996:i:2:p:188-209

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    Web page: http://www.tandfonline.com/FJDS20

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    Cited by:
    1. Isabelle Agier & Ariane Szafarz, 2013. "Subjectivity in Credit Allocation to Micro-Entrepreneurs: Evidence from Brazil," ULB Institutional Repository 2013/148889, ULB -- Universite Libre de Bruxelles.
    2. Benjamin Hermalin & Andrew K. Rose & Peter M. Garber & Andrew Crockett & David W. Mullins, Jr, 1999. "Risks to Lenders and Borrowers in International Capital Markets," NBER Chapters, in: International Capital Flows, pages 363-420 National Bureau of Economic Research, Inc.
    3. Mansuri, Ghazala, 2007. "Credit layering in informal financial markets," Journal of Development Economics, Elsevier, vol. 84(2), pages 715-730, November.
    4. Jain, Sanjay & Mansuri, Ghazala, 2003. "A little at a time: the use of regularly scheduled repayments in microfinance programs," Journal of Development Economics, Elsevier, vol. 72(1), pages 253-279, October.
    5. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    6. Nguyen Viet, Cuong & Van den Berg, Marrit, 2011. "The impact of Informal Credit on Poverty and Inequality: The Case of Vietnam," MPRA Paper 54758, University Library of Munich, Germany.
    7. Jonathan Conning, 2005. "Monitoring by Peers or by Delegates? Joint Liability Loans and Moral Hazard," Hunter College Department of Economics Working Papers 407, Hunter College: Department of Economics.
    8. weijland, Hermine, 1999. "Microenterprise Clusters in Rural Indonesia: Industrial Seedbed and Policy Target," World Development, Elsevier, vol. 27(9), pages 1515-1530, September.

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