Micro-finance competition: motivated micro-lenders, double-dipping and default

Brishti Guha () and Prabal Roy Chowdhury ()

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a tractable model of competition among motivated MFIs. We find that equilibria may or may not involve double-dipping (and consequently default), with there being double-dipping whenever the MFIs are very profit-oriented. Moreover, in an equilibrium with double-dipping, borrowers who double-dip are actually worse off compared to those who do not. Further, for intermediate levels of motivation, there can be multiple equilibria, with a double-dipping equilibrium co-existing with a no default equilibrium. Interestingly, an increase in MFI competition can lower efficiency, as well as increase the extent of double-dipping and default. Further, the interest rates may go either way, with the interest rate likely to increase if the MFIs are very motivated.

Keywords: Micro-finance competition; motivated MFIs; double-dipping; default (search for similar items in EconPapers)
JEL-codes: C7 D4 D8 G2 (search for similar items in EconPapers)
Date: 2012-01-15
New Economics Papers: this item is included in nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Micro-finance competition: Motivated micro-lenders, double-dipping and default (2013)
Working Paper: Micro-finance Competition: Motivated Micro-lenders, Double-dipping and Default (2013)
Working Paper: Micro-finance Competition: Motivated Micro-lenders, Double-dipping and Default (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:36116

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