Lending Technologies, Competition, and Consolidation in the Market for Microfinance in Bolivia
AbstractInnovations in lending technologies and market saturation have transformed La Paz, Bolivia into one of the most rapidly changing and competitive microfinance markets in the world. Two lenders stand out in this context: the pioneer BancoSol, which first entered and profitably expanded the loan market with a group liability loans, and the later entrant Caja Los Andes, which offered individual liability loans using costlier screening methods. In this paper we use a simple model of moral hazard and adverse selection to describe and analyze the nature of the competition amongst these lenders. We focus on how the terms of different loan contracts change with competition and how this affects borrowers' decisions about diligence and repayment. The hypothesized patterns of behavior are tested and shown to be consistent with empirical evidence from loan records and household survey data.
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Bibliographic InfoPaper provided by Hunter College: Department of Economics in its series Hunter College Department of Economics Working Papers with number 213.
Length: 40 pages
Date of creation: 01 Apr 2003
Date of revision:
Microfinance; Financial intermediation; poverty.;
Other versions of this item:
- Sergio Navajas & Jonathan Conning & Claudio Gonzalez-Vega, 2003. "Lending technologies, competition and consolidation in the market for microfinance in Bolivia," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(6), pages 747-770.
This paper has been announced in the following NEP Reports:
- NEP-CFN-2003-07-13 (Corporate Finance)
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