Microfinance and Investment: a Comparison with Bank and Informal Lending

Lucia Dalla Pellegrina

No 20070401, Working Papers from Università degli Studi di Milano-Bicocca, Dipartimento di Statistica

Abstract: Using data from a World Bank survey carried out in Bangladesh during the period 1991-1992, we compare the impact of microfinance programs and other types of credit on agricultural investment. After controlling for several measurable determinants of credit agreements, such as interest rates and collateral, estimates still show that microfinance programs are more likely to increase variable input expenditure than informal and bank credit are able to do. This provides evidence that microfinance incentive devices (joint responsibility, peer monitoring, social sanctions, future credit denial in case of default, etc.), perhaps together with other services associated with programs, are effective in order to promote a productive use of funds.

Keywords: Microfnance; Banks; Informal lending; Investment. (search for similar items in EconPapers)
JEL-codes: O16 O17 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-dev and nep-mfd
Date: 2007-04, Revised 2007-04
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http://www.statistica.unimib.it/utenti/WorkingPapers/WorkingPapers/20070401.pdf Revised version, 14 April 2006 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:mis:wpaper:20070401

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