Credit Unions and the Supply of Insurance to Low Income Households
AbstractThe low-income credit union modelled in this paper is an institution with a particular form of contract designed to allow it to operate among agents that are excluded from using banks. Specifically credit unions deal with those potentially on the minimum income guarantee. The challenge facing them is to distinguish between those whose motivation is consumption smoothing and those who seek the largest credible loan with the intention of defaulting. This is achieved by setting the level of the minimum deposit and the loan and deposit rates such that an intentional defaulter has no incentive to join the credit union.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 152.
Date of creation: 04 Jun 2003
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credit unions; intentional defaulter; financial contract;
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
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