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Contingent Loan Repayment in the Philippines

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  • Gubert, Flore
  • Fafchamps, Marcel

Abstract

Using data from the Philippines, this article seeks to understand how households in the study area apparently manage to avoid falling into a debt trap in spite of frequent borrowing. Findings suggest that this is achieved via three institutional features. First, most informal debt carries no interest. Second, for all debts, repayment is postponed in case of a borrower’s difficulty; this is the only insurance feature of debt repayment. Third, while debt principal is seldom forgiven or reduced, interest‐bearing debt does not carry additional interest if debt repayment is delayed. This prevents interest charges from accumulating and debt from snowballing.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4568.

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Date of creation: Jul 2007
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Publication status: Published in Economic Development and Cultural Change, 2007, Vol. 55, no. 4. pp. 633-667.Length: 34 pages
Handle: RePEc:dau:papers:123456789/4568

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Keywords: Dette; Crédit;

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References

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Citations

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Cited by:
  1. Gubert, Flore & Fafchamps, Marcel, 2007. "The Formation of Risk Sharing Networks," Economics Papers from University Paris Dauphine 123456789/4392, Paris Dauphine University.
  2. Marie Godquin & Manohar Sharma, 2005. "If only I could borrow more! Production and consumption credit constraints in the Philippines," Cahiers de la Maison des Sciences Economiques bla05008, Université Panthéon-Sorbonne (Paris 1).
  3. Landmann, Andreas & Vollan, Björn & Frölich, Markus, 2011. "Saving, Microinsurance: Why You Should Do Both or Nothing. A Behavioral Experiment on the Philippines," Proceedings of the German Development Economics Conference, Berlin 2011 51, Verein für Socialpolitik, Research Committee Development Economics.

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