Regulation and supervision of microfinance institutions: an example of cooperative credit society

Mathurin/M Founanou, and Zaka/Z Ratsimalahelo,

MPRA Paper from University Library of Munich, Germany

Abstract: We study the optimal regulation of a cooperative credit society which has private information on the intrinsic quality of its loan portfolio (adverse selection) and where the cooperative’s choice of effort to improve this quality cannot be observed by the regulator (moral hazard). We characterize the optimal contracts offered by the regulator to the credit cooperatives. We have been able to show that the optimal contracts depend on 3 main factors namely: on the accuracy of the supervisor’s signal, the likelihood of facing a high quality credit cooperative, and the cost of supervision.

Keywords: Microfinance; Informational asymmetry; optimal incentive contract; regulation; supervision (search for similar items in EconPapers)
JEL-codes: G10 G21 G28 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-ban, nep-cta, nep-hme and nep-mfd
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Published in in Onafowokan O. Oluyombo (eds.) "Cooperative Finance in Developing Economies" (2012): pp. 64-80

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:39581

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