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Geographical Distance and Moral Hazard in Microcredit: Evidence from Colombia

Author

Listed:
  • Andrea Filippo Presbitero

    () (Universit… Politecnica delle Marche, MoFiR)

  • Roberta Rabellotti

    () (Universit… di Pavia, Department of Political and Social Sciences)

Abstract

Recent years have seen an intense and critical debate about the impact of microcredit on entrepreneurial activities and poor households' welfare. This paper suggests that information asymmetries in the ex-post loan arrangement between the microfinance institution (MFI) and local borrowers could partially explain the limited impact of microcredit. The physical distance separating borrowers from the MFI could be considered a proxy of agency costs, making monitoring more costly and moral hazard easier. The estimation of the effect of distance on the borrower's self-assessed outcome of a microcredit project in Colombia confirms the presence of moral hazard in the microcredit market, with agency costs increasing with geographical distance.

Suggested Citation

  • Andrea Filippo Presbitero & Roberta Rabellotti, 2012. "Geographical Distance and Moral Hazard in Microcredit: Evidence from Colombia," Mo.Fi.R. Working Papers 58, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:58
    as

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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alimukhamedova, Nargiza & Filer, Randall K & Hanousek, Jan, 2015. "The Importance of Geographic Access for the Impact of Microfinance," CEPR Discussion Papers 10696, C.E.P.R. Discussion Papers.
    2. Mejía Cubillos, Javier, 2013. "Perfil económico del Eje Cafetero. Un análisis con miras a la competitividad territorial
      [Economic profile of Eje Cafetero. An analysis towards territorial competitiveness]
      ," MPRA Paper 43873, University Library of Munich, Germany.
    3. Akib Khan & Atonu Rabbani, 2015. "Assessing The Spatial Accessibility Of Microfinance In Northern Bangladesh: A Gis Analysis," Journal of Regional Science, Wiley Blackwell, vol. 55(5), pages 842-870, November.
    4. JJ. Cao-Alvira & LG Deidda, 2013. "Financial liberalization and the development of microcredit," Working Paper CRENoS 201324, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    5. Pierrick Baraton & Florian LEON, 2018. "Do banks and microfinance institutions compete? Microevidence from Madagascar," CREA Discussion Paper Series 18-04, Center for Research in Economic Analysis, University of Luxembourg.
    6. repec:bla:devpol:v:35:y:2017:i:5:p:645-657 is not listed on IDEAS
    7. Francis Awuku Darko, 2016. "Is there a mission drift in microfinance? Some new empirical evidence from Uganda," Studies in Economics 1603, School of Economics, University of Kent.

    More about this item

    Keywords

    Colombia; Distance; Microcredit; Relationship Lending;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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