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Expansion and welfare in microfinance: A screening model
, Viswanath Pingali
Published in Elsevier
Volume: 53
Pages: 1 - 7
The expansion of microfinance has triggered concerns of rising indebtedness and higher default and interest rates. Using a screening model, we show that even if interest and default rates increase due to expansion, borrower welfare may improve. This is because: (i) all borrowers previously denied credit can obtain loans and (ii) screening costs for pre-existing borrowers go down. Hence, policies that seek to regulate interest and screening levels can be counterproductive.
About the journal
JournalData powered by TypesetEconomic Modelling
PublisherData powered by TypesetElsevier
Open AccessNo