Learning from Visa? Incorporating Insurance Provisions in Microfinance Contracts

Loïc Sadoulet

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: This chapter argues that the repeated interaction between banks and clients allows borrowers to establish a credit record, which they can use to insure themselves from temporary liquidity shocks. It discusses microcredit contracts, and the importance of insurance for borrowers based on a survey in Guatemala. It presents a model that captures the features of microcredit contracts, i.e. the joint liability of members for individual loans and group loans. The model shows the incentive mechanisms behind microfinance contracts, and how insurance is an important by-product of liability loans.

Keywords: Guatemala; Insurance; Joint liability; Microcredit; Microfinance contracts (search for similar items in EconPapers)
Date: 2005-01
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Persistent link: https://EconPapers.repec.org/RePEc:ulb:ulbeco:2013/204855

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