Good intentions pave the way to … the local moneylender

Lutz Arnold () and Benedikt Booker

Economics Letters, 2013, vol. 118, issue 3, 466-469

Abstract: Access to microfinance entails a risk of over-indebtedness. A naïve present-biased micro-borrower may roll over debt after failure of an investment project financed with an MFI loan, even though she planned not to do so and would not have taken the MFI loan if she had been aware of the time inconsistency of her plan. Similarly, she may use a new loan to repay and end up over-indebted if she discounts the future too strongly relative to her true preferences.

Keywords: Microfinance; Over-indebtedness; Hyperbolic discounting (search for similar items in EconPapers)
JEL-codes: D91 G21 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:118:y:2013:i:3:p:466-469

DOI: 10.1016/j.econlet.2012.12.027

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