Advanced Search
MyIDEAS: Login to save this paper or follow this series

State intervention and the (micro)credit market in developed countries: loan guarantee and business development services

Contents:

Author Info

  • Renaud Bourlès
  • Anastasia Cozarenco

Abstract

We analyze in this paper how various forms of State intervention can impact the microcredit market in developed countries. Using a simple model where entrepreneurs borrow without collateral, we study the effect of different policies on microfinance institutions' lending behavior. We first introduce state intervention through the loan guarantee and show that, not surprisingly, it increases the number of entrepreneurs receiving a loan. However, after modeling business development services provided by the microfinance institution, we show that the government loan guarantee can have a counterproductive effect by reducing the number of entrepreneurs benefiting from such services. We therefore analyze an alternative policy: the subsidization of business development services by the State. We then provide a condition under which - for fixed government expenditures - such subsidies are more effective (in terms of outreach) than loan guarantees.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/143450/1/wp13019.pdf
Download Restriction: no

Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 13-019.

as in new window
Length: 17 p.
Date of creation: 25 Apr 2013
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/143450

Contact details of provider:
Postal: CP114/03, 42 avenue F.D. Roosevelt, 1050 Bruxelles
Phone: +32 (0)2 650.48.64
Fax: +32 (0)2 650.41.88
Email:
Web page: http://difusion.ulb.ac.be
More information through EDIRC

Related research

Keywords: microcredit; loan guarantee; business development services; microfinance institution;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Bert D'Espallier & Marek Hudon & Ariane Szafarz, 2013. "Unsubsidized Microfinance Institutions," Working Papers CEB 13-012, ULB -- Universite Libre de Bruxelles.
  2. Daniel Traca, 2011. "On the Efficiency Effects of Subsidies in Microfinance: An Empirical Inquiry," ULB Institutional Repository 2013/89989, ULB -- Universite Libre de Bruxelles.
  3. Emran, M. Shahe & Morshed, A.K.M Mahbub & Stiglitz, Joseph E., 2011. "Microfinance and Missing Markets," MPRA Paper 41451, University Library of Munich, Germany.
  4. Robert M. Townsend, 2003. "Microcredit And Mechanism Design," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 468-477, 04/05.
  5. William G. Gale, 1988. "Federal Lending and the Market for Credit," UCLA Economics Working Papers 504, UCLA Department of Economics.
  6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  7. Beatriz Armendariz & Bert D'Espallier & Marek Hudon & Ariane Szafarz, 2011. "Subsidy Uncertainty and Microfinance Mission Drift," Working Papers CEB 11-014, ULB -- Universite Libre de Bruxelles.
  8. Ben Craig & William Jackson & James Thomson, 2008. "Credit market failure intervention: Do government sponsored small business credit programs enrich poorer areas?," Small Business Economics, Springer, vol. 30(4), pages 345-360, April.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:sol:wpaper:2013/143450. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.