Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73416
Authors: 
Arnold, Lutz
Reeder, Johannes
Steger, Susanne
Year of Publication: 
2009
Series/Report no.: 
BGPE Discussion Paper 67
Abstract: 
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.
Subjects: 
microfinance
group lending
enforcement
JEL: 
G21
Document Type: 
Working Paper

Files in This Item:
File
Size
444.95 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.