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Micro-finance competition: motivated micro-lenders, double-dipping and default

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  • Guha, Brishti
  • Roy Chowdhury, Prabal

Abstract

We develop a tractable model of competition among motivated MFIs. We find that equilibria may or may not involve double-dipping (and consequently default), with there being double-dipping whenever the MFIs are very profit-oriented. Moreover, in an equilibrium with double-dipping, borrowers who double-dip are actually worse off compared to those who do not. Further, for intermediate levels of motivation, there can be multiple equilibria, with a double-dipping equilibrium co-existing with a no default equilibrium. Interestingly, an increase in MFI competition can lower efficiency, as well as increase the extent of double-dipping and default. Further, the interest rates may go either way, with the interest rate likely to increase if the MFIs are very motivated.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36116.

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Date of creation: 15 Jan 2012
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Handle: RePEc:pra:mprapa:36116

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Keywords: Micro-finance competition; motivated MFIs; double-dipping; default;

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Citations

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Cited by:
  1. Brishti Guha & Prabal Roy Chowdhury, 2013. "Micro-finance Competition: Motivated Micro-lenders, Double-dipping and Default," Working Papers 01-2013, Singapore Management University, School of Economics.
  2. Janda, Karel & Zetek, Pavel, 2014. "Survey of Microfinance Controversies and Challenges," MPRA Paper 56657, University Library of Munich, Germany.
  3. Janda, Karel & Zetek, Pavel, 2014. "Mikrofinanční Revoluce: Aktuální Kontroverze A Výzvy
    [Microfinance Revolution: Recent Controversies And Challenges]
    ," MPRA Paper 54098, University Library of Munich, Germany.

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