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Competitive microcredit markets: differentiation and ex ante incentives for multiple borrowing

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  • By Paolo Casini

Abstract

I analyse an oligopolistic microcredit market characterized by asymmetric information on the riskiness of borrowers. I study the effects of competition when, due to the absence of credit bureaus, small entrepreneurs can borrow from more than one institution. I show how contract design can influence the ex ante incentives for multiple borrowing. Our model predicts that, under some conditions, a screening strategy based on contract differentiation and credit rationing can avoid multiple borrowing.

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  • By Paolo Casini, 2015. "Competitive microcredit markets: differentiation and ex ante incentives for multiple borrowing," Oxford Economic Papers, Oxford University Press, vol. 67(4), pages 1015-1033.
    • Handle: RePEc:oup:oxecpp:v:67:y:2015:i:4:p:1015-1033.
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    File URL: http://hdl.handle.net/10.1093/oep/gpv047
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    Cited by:

    1. Chichaibelu, Bezawit Beyene & Waibel, Hermann, 2017. "Borrowing from “Pui” to Pay “Pom”: Multiple Borrowing and Over-Indebtedness in Rural Thailand," World Development, Elsevier, vol. 98(C), pages 338-350.

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