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Is the credit worth it? For-profit lenders in microfinance with rational and behavioral borrowers

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  • de Quidt, Jonathan
  • Ghatak, Maitreesh

Abstract

The bulk of the literature on microcredit has focused on either not‐for‐profit lenders or assumes a perfectly competitive, zero‐profit market equilibrium. Yet the market has experienced a significant shift toward for‐profit lending and the assumptions of perfect competition are likely to be too strong in many locations. We review the state of the literature on for‐profit lending in microcredit, consider its implications for both conventionally ‘rational’ borrowers and for borrowers with behavioral biases, and point out directions for future research.

Suggested Citation

  • de Quidt, Jonathan & Ghatak, Maitreesh, 2018. "Is the credit worth it? For-profit lenders in microfinance with rational and behavioral borrowers," LSE Research Online Documents on Economics 87515, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:87515
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    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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