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Microcredit in Industrialized Countries: Unexpected Consequences of Regulatory Loan Ceilings

Listed author(s):
  • Anastasia Cozarenco
  • Ariane Szafarz

Subsidized microfinance institutions (MFIs) provide affordable credit to small entrepreneurs. Many industrialized countries regulate MFIs. But in a market with accessible small business financing, regulatory loan ceilings can jeopardize the supply of microcredit to the most disadvantaged people. This is because small entrepreneurs in need of above-ceiling credit have the option to combine a ceiling-high microcredit with a supplementary loan from a regular bank. By reducing information asymmetry, this type of co-financing may prompt MFIs to divert credit away from entrepreneurs seeking below-ceiling loans. This study uses hand-collected data from a French MFI to test, and partly confirm, this theory.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 16-021.

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Length: 54 p.
Date of creation: 29 Apr 2016
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/229550
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