Technology replaces culture in microcredit markets: the case of Italian MAGs
AbstractWe collect data from three Italian microcredit institutions which operate in urban areas by granting individual loans to two categories of wealthless borrowers: single entrepreneurs and organizations (cooperatives and associations).Evidence shows that organizations repay with higher probability and are charged a lower average interest rate than individuals. We use these findings to construct a lending scheme which consists of granting loans provided that borrowers form production teams (i.e. organizations). We consider a microcredit market with adverse selection à la De Meza- Webb and we verify that repayment rate increases, while interest rate falls with respect to individual lending if the above scheme, which we refer to as production team lending, is implemented. Our instrument, like joint liability implemented in rural economies, extracts information from borrowers through a peer selection mechanism but, differently from joint liability, fits to urban contexts where borrowers are less likely to know each other and social sanctions are weak.
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Bibliographic InfoPaper provided by Department of Economics, Parma University (Italy) in its series Economics Department Working Papers with number 2006-EP11.
Length: 19 pages
Date of creation: 2006
Date of revision:
Microcredit; Urban areas; Production Team Lending; Adverse Selection;
Other versions of this item:
- Calidoni-Lundberg, Federica & Fedele, Alessandro, 2007. "Technology Replaces Culture in Microcredit Markets: the Case of Italian MAGs," AICCON Working Papers 46-2007, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
- Alessandro Fedele & Federica Calidoni Lundberg, 2006. "Technology Replaces Culture in Microcredit Markets: the Case of Italian MAGs," Working Papers 20060902, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica, revised Sep 2006.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-28 (All new papers)
- NEP-DEV-2006-10-28 (Development)
- NEP-ENT-2006-10-28 (Entrepreneurship)
- NEP-MFD-2006-10-28 (Microfinance)
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.:
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