A Dynamic Model Of Microlending In The Developing Countries
In this paper, we examine the contract design problem of banks that extend loans to poor borrowers and seek to maximize outreach while remaining financially sustainable. A dynamic model is developed that shows how interest rates can be determined based on information about productivity and diligence characteristics of borrowers, investment opportunities, correlation of business activities, peer monitoring costs, and social sanctions. The results indicate that relative to the traditional static models, the dynamic model explains better the current experience in individual and group lending in developing countries.
|Date of creation:||2001|
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- Ghatak, Maitreesh & Guinnane, Timothy W., 1999.
"The economics of lending with joint liability: theory and practice,"
Journal of Development Economics,
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- Maitreesh Ghatak & Timothy W. Guinnane, 1998. "The Economics of Lending with Joint Liability: Theory and Practice," Working Papers 791, Economic Growth Center, Yale University.
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- Conning, Jonathan, 1999. "Outreach, sustainability and leverage in monitored and peer-monitored lending," Journal of Development Economics, Elsevier, vol. 60(1), pages 51-77, October.
- Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
- Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December. Full references (including those not matched with items on IDEAS)
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