Relationship Lending in Microcredit: Evidence from Bangladesh
We use primary data compiled from the field in 34 randomly selected villages in Bangladesh to examine the role of bank-borrower relationships in the application and approval stages of microcredit. We find evidence that potential borrowers who have maintained membership for a long time, and who have non-mandatory saving accounts and a successful track record of previous loans are more likely to apply, and be approved, for individual as well as group loans. Having a relationship with multiple lenders increases the probability of applying for a loan but reduces the probability of being approved for it. We also provide evidence that it is the large (rather than small) microfinance institutions who rely more on relationship metrics.
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- Demirguc-Kunt, Asli & Love, Inessa & Maksimovic, Vojislav, 2004.
"Business Environment and the Incorporation Decision,"
Policy Research Working Paper Series
3317, The World Bank.
- Demirguc-Kunt, Asli & Love, Inessa & Maksimovic, Vojislav, 2006. "Business environment and the incorporation decision," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2967-2993, November.
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