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Is The Credit Worth It? For-Profit Lenders In Microfinance With Rational And Behavioral Borrowers

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  • Jonathan DE QUIDT
  • Maitreesh GHATAK

Abstract

The bulk of the literature on microcredit has focused on either not-for-profit lenders or assumes a perfectly competitive, zero-profit market equilibrium. Yet the market has experienced a significant shift toward for-profit lending and the assumptions of perfect competition are likely to be too strong in many locations. We review the state of the literature on for-profit lending in microcredit, consider its implications for both conventionally ‘rational’ borrowers and for borrowers with behavioral biases, and point out directions for future research.

Suggested Citation

  • Jonathan DE QUIDT & Maitreesh GHATAK, 2018. "Is The Credit Worth It? For-Profit Lenders In Microfinance With Rational And Behavioral Borrowers," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(1), pages 175-199, March.
    • Handle: RePEc:bla:annpce:v:88:y:2017:i:3:p:175-199
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    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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