Business Training and Loan Repayment: Theory and Evidence from Microcredit in France

Renaud Bourlès (), Anastasia Cozarenco (), Dominique Henriet () and Xavier Joutard ()
Additional contact information
Anastasia Cozarenco: Montpellier Business School and CERMi, http://mrm.edu.umontpellier.fr/
Dominique Henriet: Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE, https://www.amse-aixmarseille.fr/users/henriet
Xavier Joutard: Aix-Marseille University, CNRS, LEST and OFCE, http://www.lest.cnrs.fr/spip.php?article906

No 1811, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: Although most Microfinance Institutions (MFIs) invest in non-financial services such as business training, empirical evidence on the impact of training on microborrowers’ performance is at best mixed. We address this issue by accounting for business training allocation and its possible effects on borrowers’ behavior. We first show empirically (using data from a French MFI) that the relationship between business training allocation and borrowers’ risk is complex and non- linear. By taking this into account, we establish a positive effect of business training on the survival time of loans. These results are robust to controlling for the MFI’s selection process. We moreover propose a theoretical explanation for the non-linear relationship between borrowers’ risk and training allocation based on reverse asymmetric information, showing that it can lead to increased MFI outreach.

Keywords: microcredit; business training; reverse asymmetric information (search for similar items in EconPapers)
JEL-codes: C34 C41 D82 G21 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-03
New Economics Papers: this item is included in nep-ban and nep-mfd
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Business Training and Loan Repayment: Theory and Evidence from Microcredit in France (2018)
Working Paper: Business Training and Loan Repayment: Theory and Evidence from Microcredit in France (2018)
Working Paper: Business Training Allocation and Credit Scoring: Theory and Evidence from Microcredit in France (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1811

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