Journal Article

Competitive microcredit markets: differentiation and ex ante incentives for multiple borrowing

Paolo Casini

in Oxford Economic Papers

Volume 67, issue 4, pages 1015-1033
Published in print October 2015 | ISSN: 0030-7653
Published online July 2015 | e-ISSN: 1464-3812 | DOI: https://dx.doi.org/10.1093/oep/gpv047
Competitive microcredit markets: differentiation and ex ante incentives for multiple borrowing

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  • Nonprofit Organizations and Public Enterprise
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  • Economic Development
  • Market Structure, Firm Strategy, and Market Performance

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I analyse an oligopolistic microcredit market characterized by asymmetric information on the riskiness of borrowers. I study the effects of competition when, due to the absence of credit bureaus, small entrepreneurs can borrow from more than one institution. I show how contract design can influence the ex ante incentives for multiple borrowing. Our model predicts that, under some conditions, a screening strategy based on contract differentiation and credit rationing can avoid multiple borrowing.

Keywords: G21; L13; L31; O16

Journal Article.  9162 words.  Illustrated.

Subjects: Nonprofit Organizations and Public Enterprise ; Banking ; Economic Development ; Market Structure, Firm Strategy, and Market Performance

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