Microfinance and markets: New results for the Besley-Coate group lending model
Microfinance currently experiences a huge inflow of private investors and a surge in the use of market instruments. This raises the question of what market equilibria in microfinance markets look like and which kinds of market failure tend to afflict them. The present paper conducts an equilibrium analysis of Besley and Coate’s (1995) group lending model with enforcement problems.We show that a consideration of repayment rates alone is not sufficient to predict market outcomes, as it is biased towards group lending. Market equilibria are likely to exhibit the same kinds of market failure as equilibria in adverse selection models, viz., financial fragility, redlining, and credit rationing. Social sanctions ameliorate these problems, but do not eliminate them.
|Date of creation:||28 Jan 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Universitäts-Str. 31, D-93040 Regensburg|
Phone: +49 941 943-2392
Fax: +49 941 943-4752
Web page: http://www-wiwi.uni-regensburg.de/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:bay:rdwiwi:7113. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gernot Deinzer)
If references are entirely missing, you can add them using this form.