Microfinance games

Xavier Gine, Pamela Jakiela, Dean Karlan and Jonathan Morduch

No 3959, Policy Research Working Paper Series from The World Bank

Abstract: Microfinance has been heralded as an effective way to address imperfections in credit markets. But from a theoretical perspective, the success of microfinance contracts has puzzling elements. In particular, the group-based mechanisms often employed are vulnerable to free-riding and collusion, although they can also reduce moral hazard and improve selection. The authors created an experimental economics laboratory in a large urban market in Lima, Peru and over seven months conducted 11 different games that allow them to unpack microfinance mechanisms in a systematic way. They find that risk-taking broadly conforms to predicted patterns, but that behavior is safer than optimal. The results help to explain why pioneering microfinance institutions have been moving away from group-based contracts.

Keywords: Banks&Banking Reform; Insurance&Risk Mitigation; Financial Intermediation; Social Accountability; Civic Participation and Corporate Governance (search for similar items in EconPapers)
Date: 2006-07-01
New Economics Papers: this item is included in nep-fmk and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Related works:
Journal Article: Microfinance Games (2010)
Working Paper: Microfinance Games (2006)
Working Paper: Microfinance Games (2006)
Working Paper: Microfinance games (2006)
Working Paper: Microfinance Games (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:3959

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