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Contingent Loan Repayment in the Philippines Author info | Abstract | Publisher info | Download info | Related research | Statistics Marcel Fafchamps
Flore Gubert
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Using data from the Philippines, this paper seeks to understand how households in the study area apparently manage to avoid falling in a debt trap in spite of frequent borrowing. Findings suggest this is achieved via three institutional features. First, most informal debt carries no interest. As we show in the conceptual section, charging zero interest makes a debt trap impossible. Second, for all debts, repayment is postponed in case of 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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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number
215.
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Date of creation: 2004Date of revision:
Handle: RePEc:oxf:wpaper:215Contact details of provider: Postal: Manor Rd. Building, Oxford, OX1 3UQ Email: Web page: http://www.economics.ox.ac.uk/ More information through EDIRC
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Keywords: Debt Repayment Informal Credit Risk Sharing Labor Bonding Other versions of this item:
Find related papers by JEL classification: O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements G20 - Financial Economics - - Financial Institutions and Services - - - General
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references Cited by : (explanations , 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.)
Marcel Fafchamps & Flore Gubert, 2005.
"The Formation of Risk Sharing Networks ,"
Working Papers
DT/2005/13, DIAL (Développement, Institutions & Analyses de Long terme).
[Downloadable!]
Other versions: 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).
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