Information, the Cost of Credit, and Operational Eﬃciency: An Empirical Study of Microfinance
We provide direct evidence on the impact of asymmetric information on both financing and operating activities through a study of credit evaluations of microfinance institutions (MFIs). We employ a regression discontinuity model that exploits the eligibility criteria of an evaluation subsidy oﬀered by a nonprofit consortium. Evaluations dramatically cut the cost of financing. This eﬀect is strongest for commercial lenders and for short-term MFI--lender relationships. The impact of evaluations on the supply of finance is mixed. Evaluated MFIs lend more eﬃciently, extending more loans per employee. The Author 2010. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: firstname.lastname@example.org., Oxford University Press.
Volume (Year): 23 (2010)
Issue (Month): 6 (June)
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