Non-grant microfinance, incentives and efficiency

Alexander Karaivanov

Applied Economics, 2018, vol. 50, issue 23, 2509-2524

Abstract: I show that charging interest on funds provided by donors or investors to microfinance institutions (MFIs) can increase efficiency, the total number of loans and borrower welfare, compared to grant or concessionary funding. In a setting in which MFIs supply costly non-contractible effort, putting a price or raising the price of loanable funds strengthens the MFIs’ incentives to put effort in credit administration or monitoring, to extend more loans, and/or reduce overhead costs. This theoretical result is robust to several variations of the benchmark model allowing for an endogenous lending rate, motivated MFIs and endogenous overhead costs.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2017.1400655 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:50:y:2018:i:23:p:2509-2524

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2017.1400655

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().