Fair interest rates when lending to the poor: Are fair prices derived from basic principles of justice?
AbstractThis paper addresses the fairness of prices, with a focus on fair interest rates as they apply to microlending transactions for the poor. Under different assumptions on fairness in interest rate policies and the principles of justice as described in A Theory of Justice (Rawsl, 1976), the paper determines the extent of the ‘just’ range of a price. Using the original notion of fair reservation price and fair bargaining range, it is shown that some unfair considerations can make the fair bargaining range negative. Therefore, we propose an additional criterion for fairness: a fair distribution of the benefits within the fair bargaining range between borrowers and lenders. This new criterion is particularly useful and relevant, at minimum, for socially-minded ones active on the microfinance markets.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 06-015.RS.
Length: 25 p.
Date of creation: 2006
Date of revision:
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More information through EDIRC
justice; microfinance; interest rate; principles.;
Find related papers by JEL classification:
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
- M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-28 (All new papers)
- NEP-FMK-2006-07-28 (Financial Markets)
- NEP-HPE-2006-07-28 (History & Philosophy of Economics)
- NEP-MFD-2006-07-28 (Microfinance)
- NEP-PKE-2006-07-28 (Post Keynesian Economics)
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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