Geographical Distance and Moral Hazard in Microcredit: Evidence from Colombia

Andrea Presbitero and Roberta Rabellotti

No 58, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: Recent years have seen an intense and critical debate about the impact of microcredit on entrepreneurial activities and poor households' welfare. This paper suggests that information asymmetries in the ex-post loan arrangement between the microfinance institution (MFI) and local borrowers could partially explain the limited impact of microcredit. The physical distance separating borrowers from the MFI could be considered a proxy of agency costs, making monitoring more costly and moral hazard easier. The estimation of the effect of distance on the borrower's self-assessed outcome of a microcredit project in Colombia confirms the presence of moral hazard in the microcredit market, with agency costs increasing with geographical distance.

Keywords: Colombia; Distance; Microcredit; Relationship Lending (search for similar items in EconPapers)
JEL-codes: G21 G29 O16 (search for similar items in EconPapers)
Pages: 20
Date: 2012-01
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Citations: View citations in EconPapers (4)

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http://docs.dises.univpm.it/web/quaderni/pdfmofir/Mofir058.pdf First version, 2012 (application/pdf)

Related works:
Journal Article: GEOGRAPHICAL DISTANCE AND MORAL HAZARD IN MICROCREDIT: EVIDENCE FROM COLOMBIA (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:anc:wmofir:58

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