Funding microfinance under asymmetric information

Suman Ghosh and Eric Van Tassel ()

Journal of Development Economics, 2013, vol. 101, issue C, 8-15

Abstract: We consider a model where poverty minimizing donors fund microfinance lenders that are heterogeneous in cost. Under asymmetric information the donors face a choice whether to issue grants or to charge the lenders for funds. While charging for funds leads to higher interest rates, a higher rate can induce separation by squeezing the higher cost lenders. Whether separation is good for aggregate poverty reduction or not depends on the quantity of supply of funds. When the supply is small grants are best, but when the supply is large enough it is better that lenders pay for external funding.

Keywords: Microfinance; Poverty; Screening (search for similar items in EconPapers)
JEL-codes: G21 O12 O16 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:101:y:2013:i:c:p:8-15

DOI: 10.1016/j.jdeveco.2012.09.005

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