Optimal Credit Rationing in Not-For-Profit Financial Institutions
David Canning (),
Clifford W. Jefferson and
John E. Spencer
Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research
We examine the dynamic optimization problem of Not-For-Profit (NFP) financial institutions that aim to maximize the welfare of members. We characterize the optimal policy and find that it involves credit rationing. Interest rates set by mature NFPs will typically be more favorable to customers than market rates, as "profits" are distributed in the form of interest rate subsidies. Credit rationing is required to prevent these subsidies from distorting the volume of loans from the efficient level. Efficient credit rationing requires knowledge of the consumer surplus generated by each loan, necessitating a close relationship between the NFP and its members.
References: Add references at CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Optimal Credit Rationing in Not-For-Profit Financial Institutions (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:fth:harver:1866
Access Statistics for this paper
More papers in Harvard Institute of Economic Research Working Papers from Harvard - Institute of Economic Research
Contact information at EDIRC.
Series data maintained by Thomas Krichel ().