Relationship Lending in Microcredit: Evidence from Bangladesh
AbstractWe use primary data compiled from the field in 34 randomly selected villages in Bangladesh to examine the role of bank-borrower relationships in the application and approval stages of microcredit. We find evidence that potential borrowers who have maintained membership for a long time, and who have non-mandatory saving accounts and a successful track record of previous loans are more likely to apply, and be approved, for individual as well as group loans. Having a relationship with multiple lenders increases the probability of applying for a loan but reduces the probability of being approved for it. We also provide evidence that it is the large (rather than small) microfinance institutions who rely more on relationship metrics.
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Bibliographic InfoPaper provided by Purdue University, Department of Consumer Sciences in its series Working Papers with number 1005.
Length: 38 pages
Date of creation: Mar 2010
Date of revision:
Microcredit; relationships; credit constraint; adverse selection; peer monitoring;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-01-23 (All new papers)
- NEP-BEC-2011-01-23 (Business Economics)
- NEP-ENT-2011-01-23 (Entrepreneurship)
- NEP-SBM-2011-01-23 (Small Business Management)
- NEP-TRA-2011-01-23 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Demirguc-Kunt, Asli & Love, Inessa & Maksimovic, Vojislav, 2004.
"Business Environment and the Incorporation Decision,"
Policy Research Working Paper Series
3317, The World Bank.
- Demirguc-Kunt, Asli & Love, Inessa & Maksimovic, Vojislav, 2006. "Business environment and the incorporation decision," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2967-2993, November.
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