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The Microfinance Collateralized Debt Obligation: A Modern Robin Hood?

  • Byström, Hans N.E.

Summary The aim of this paper is to highlight a potentially very fruitful link between micro-entrepreneurs and international capital markets. It discusses the role structured finance and credit derivatives could play in extending finance to micro-entrepreneurs on a much larger scale than today's mainly non-commercial microfinance industry. The mechanisms of so-called collateralized debt obligations (CDOs) are described and extended to the microfinance world. Finally, a hypothetical, but realistic, example of such a microfinance CDO (MiCDO) is used to discuss the implications of securitization and tranching of microcredits.

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File URL: http://www.sciencedirect.com/science/article/B6VC6-4SVM14N-9/2/6a1c8d2b42d9577efd021605d8899bf9
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Article provided by Elsevier in its journal World Development.

Volume (Year): 36 (2008)
Issue (Month): 11 (November)
Pages: 2109-2126

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Handle: RePEc:eee:wdevel:v:36:y:2008:i:11:p:2109-2126
Contact details of provider: Web page: http://www.elsevier.com/locate/worlddev

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  1. Antje Berndt & Rohan Douglas & Darrell Duffie & Mark Ferguson & David Schranz, 2005. "Measuring default risk premia from default swap rates and EDFs," BIS Working Papers 173, Bank for International Settlements.
  2. Dehejia, Rajeev & Montgomery, Heather & Morduch, Jonathan, 2012. "Do interest rates matter? Credit demand in the Dhaka slums," Journal of Development Economics, Elsevier, vol. 97(2), pages 437-449.
  3. Weiss, John & Montgomery, Heather, 2004. "Great expectations: microfinance and poverty reduction in Asia and Latin America," MPRA Paper 33142, University Library of Munich, Germany.
  4. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  5. Bank for International Settlements, 2005. "The role of ratings in structured finance: issues and implications," CGFS Papers, Bank for International Settlements, number 23, April.
  6. Richard L. Meyer, 2002. "The demand for flexible microfinance products: lessons from Bangladesh," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(3), pages 351-368.
  7. Ingo Fender & John Kiff, 2004. "CDO rating methodology: Some thoughts on model risk and its implications," BIS Working Papers 163, Bank for International Settlements.
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