Regulation and supervision of microfinance institutions: an example of cooperative credit society
AbstractWe study the optimal regulation of a cooperative credit society which has private information on the intrinsic quality of its loan portfolio (adverse selection) and where the cooperative’s choice of effort to improve this quality cannot be observed by the regulator (moral hazard). We characterize the optimal contracts offered by the regulator to the credit cooperatives. We have been able to show that the optimal contracts depend on 3 main factors namely: on the accuracy of the supervisor’s signal, the likelihood of facing a high quality credit cooperative, and the cost of supervision.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39581.
Date of creation: Mar 2012
Date of revision:
Microfinance; Informational asymmetry; optimal incentive contract; regulation; supervision;
Find related papers by JEL classification:
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-01 (All new papers)
- NEP-BAN-2012-07-01 (Banking)
- NEP-CTA-2012-07-01 (Contract Theory & Applications)
- NEP-HME-2012-07-01 (Heterodox Microeconomics)
- NEP-MFD-2012-07-01 (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.:
- Eduardo Levy Yeyati & Tito Cordella, 1997.
"Public Disclosure and Bank Failures,"
IMF Working Papers
97/96, International Monetary Fund.
- Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
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