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May microcredit lead to inclusion?

Author

Listed:
  • Djaffar Lessy
  • Nahla Dhib

    (Equipe de Probabilité et Statistique - LJAD - Laboratoire Jean Alexandre Dieudonné - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur, LJAD - Laboratoire Jean Alexandre Dieudonné - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Francine Diener

    (Equipe de Probabilité et Statistique - LJAD - Laboratoire Jean Alexandre Dieudonné - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Marc Diener

    (Equipe de Probabilité et Statistique - LJAD - Laboratoire Jean Alexandre Dieudonné - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

Abstract

We consider a Markov-Chain model for a Microfinance Institution (MFI) borrower who can be in one of four states: Applicant (A), Beneficiary (B − or B +) of a small or a large loan, or included (I) in the regular banking system. Given the transition matrix we compute the equilibrium and deduce the influence of probability parameters on what is profitable to the borrower within breaking-even constraints of the MFI. We give a general theorem on the total expected actualized income of a Markov Chain with Income (MCI), that we then apply to our model to determine the constrains emerging from Absence of Strategic Default (ASD) requirements. These do not only bound the probabilities from above but sometimes also from below.

Suggested Citation

  • Djaffar Lessy & Nahla Dhib & Francine Diener & Marc Diener, 2020. "May microcredit lead to inclusion?," Working Papers hal-02914031, HAL.
    • Handle: RePEc:hal:wpaper:hal-02914031
    Note: View the original document on HAL open archive server: https://hal.science/hal-02914031
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    References listed on IDEAS

    as
    1. Alexander Tedeschi, Gwendolyn, 2006. "Here today, gone tomorrow: Can dynamic incentives make microfinance more flexible?," Journal of Development Economics, Elsevier, vol. 80(1), pages 84-105, June.
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    More about this item

    Keywords

    Micro-credit; Markov Chain with Income; financial inclusion; Absence of Strategic Default JEL codes: C02; D24; G21; L26;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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