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Good Intentions Pave the Way to ... the Local Moneylender

Author

Listed:
  • Lutz G. Arnold
  • Benedikt Booker

Abstract

Microborrowers may take usurious loans to repay a loan taken from a micro nance institution because of having neglected the time inconsistency of optimal plans or having discounted future payoffs too strongly from the ex-post perspective. Microfinance programs should strive at preventing such consequences of bounded rationality.

Suggested Citation

  • Lutz G. Arnold & Benedikt Booker, 2012. "Good Intentions Pave the Way to ... the Local Moneylender," Working Papers 126, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:126_arnoldbooker
    as

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    File URL: http://www.bgpe.de/texte/DP/126_ArnoldBooker.pdf
    File Function: First version, 2012
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    References listed on IDEAS

    as
    1. 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.
    2. Zeller, Manfred & Sharma, Manohar & Ahmed, Akhter U. & Rashid, Shahidur, 2001. "Group-based financial institutions for the rural poor in Bangladesh: an institutional- and household-level analysis," Research reports 120, International Food Policy Research Institute (IFPRI).
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    microfinance; hyperbolic discounting;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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