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Business Training with a Better-Informed Lender: Theory and Evidence from Microcredit in France

Author

Listed:
  • Renaud Bourlès
  • Anastasia Cozarenco
  • Dominique Henriet
  • Xavier Joutard

Abstract

In the microfinance sector, experienced lenders enjoy an information advantage over first-time entrepreneurs. Our study proposes an analysis of the business training provided on a par with microloans and its potential effect on borrowers’behavior. First, we present a simple theoretical mechanism showing that an information advantage concerning borrower risk can lead to a non-monotonic relationship between risk and business training provision. Second, using a hand-collected data set of loan applications to a French MFI, we empirically examine the relationship between business training provision and borrower risk, controlling for selection bias and endogeneity. The collected evidence supports the existence of a non-monotonic relationship and shows that business training significantly increases the survival time of loans. Our results are robust to alternative econometric models.

Suggested Citation

  • Renaud Bourlès & Anastasia Cozarenco & Dominique Henriet & Xavier Joutard, 2022. "Business Training with a Better-Informed Lender: Theory and Evidence from Microcredit in France," Annals of Economics and Statistics, GENES, issue 148, pages 65-108.
    • Handle: RePEc:adr:anecst:y:2022:i:148:p:65-108
    DOI: https://doi.org/10.2307/48706310
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    Cited by:

    1. is not listed on IDEAS
    2. Emmanuel Tetteh Jumpah & Emmanuel Kojo Tetteh & Abdulai Adams, 2018. "Microcredit repayment among smallholder farmers: what microfinance institutions need to know," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 8(2), pages 74-91, July.

    More about this item

    Keywords

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    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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