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Being Credit Rationed: Delay and Transaction Cost

Author

Listed:
  • Rajlakshmi Mallik

    (Centre National de la Recherche Scientifique (CNRS), A/2/5 Pearl Apartment, 50 B Kailash Bose Street, Kolkata 7000 006, West Bengal, India)

Abstract

This paper develops alternative models explaining why households with credit need to finance their projects (enterprises) avoid formal credit. More importantly it argues that the problem of avoidance of formal credit and ensuring credit access is not necessarily restricted to the small borrower or borrowers with inefficient projects. Delay cost and personal loan transaction cost may also cause highly productive projects or larger projects shying away from formal credit in spite of low interest rates. Some of the policy implications of the above findings are also discussed.

Suggested Citation

  • Rajlakshmi Mallik, 2015. "Being Credit Rationed: Delay and Transaction Cost," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 17(02), pages 1-28.
    • Handle: RePEc:wsi:igtrxx:v:17:y:2015:i:02:n:s0219198915400204
    DOI: 10.1142/S0219198915400204
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    References listed on IDEAS

    as
    1. Degryse, Hans & Lu, Liping & Ongena, Steven, 2013. "Informal or formal financing? Or both? First evidence on the co-funding of Chinese firms," BOFIT Discussion Papers 14/2013, Bank of Finland Institute for Emerging Economies (BOFIT).
    2. Pearlman, Sarah, 2010. "Flexibility matters: do more rigid loan contracts reduce demand for microfinance?," Research Department working papers 214, CAF Development Bank Of Latinamerica.
    3. Shahidur R. Khandker & Hussain A. Samad & Rubaba Ali, 2013. "Does Access to Finance Matter in Microenterprise Growth? Evidence from Bangladesh," Working Papers 15, Institute of Microfinance (InM).
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    6. Campero Alejandra & Kaiser Karen, 2013. "Access to Credit: Awareness and Use of Formal and Informal Credit Institutions," Working Papers 2013-07, Banco de México.
    7. F.N. Okurut & A. Schoombee & S. Van Der Berg, 2005. "Credit Demand And Credit Rationing In The Informal Financial Sector In Uganda1," South African Journal of Economics, Economic Society of South Africa, vol. 73(3), pages 482-497, September.
    8. Safavian, Mehnaz & Wimpey, Joshua, 2007. "When do enterprises prefer informal credit ?," Policy Research Working Paper Series 4435, The World Bank.
    9. Bell, Clive & Srinivasan, T N & Udry, Christopher, 1997. "Rationing, Spillover, and Interlinking in Credit Markets: The Case of Rural Punjab," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 557-585, October.
    10. Degryse, H.A. & Lu, L. & Ongena, S., 2013. "Informal or Formal Financing? Or Both? First Evidence on the Co-Funding of Chinese Firms," Other publications TiSEM fb098792-3f60-4635-a8f6-4, Tilburg University, School of Economics and Management.
    11. Inessa Love & Nataliya Mylenko, 2003. "Credit reporting and financing constraints," Policy Research Working Paper Series 3142, The World Bank.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Credit rationing; participation; access; delay cost; personal transaction cost; informal loan; formal loan;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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