EconPapers    
Economics at your fingertips  
 

Repayment Frequency in Microfinance Contracts with Present-Biased Borrowers

Greg Fischer and Maitreesh Ghatak ()

STICERD - Economic Organisation and Public Policy Discussion Papers Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: This paper analyzes the theoretical underpinnings of high-frequency repayment, afeature in nearly all microfinance contracts that has been largely overlooked bytheorists. The pervasive belief among practitioners that frequent repayment is criticalin achieving high repayment rates is puzzling. Classically rational individualsshould benefit from more flexible repayment schedules, and less frequent repaymentshould increase neither default nor delinquency. This paper proposes a simpleexplanation based on present bias. For such individuals, more frequent repaymentcan increase the maximum incentive compatible loan size. However, the welfareeffects are ambiguous. More frequent repayment can lead to over-borrowing,reducing welfare as it increases loan sizes.4

Keywords: Microfinance; Repayment Frequency; Present-Bias (search for similar items in EconPapers)
JEL-codes: O12 O16 D03 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-mfd
Date: 2010-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed

Downloads: (external link)
http://sticerd.lse.ac.uk/dps/eopp/eopp21.pdf (application/pdf)

Related works:
Working Paper: Repayment frequency in microfinance contracts with present-biased borrowers (2010) Downloads
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:cep:stieop:021

Access Statistics for this paper

More papers in STICERD - Economic Organisation and Public Policy Discussion Papers Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE
Bibliographic data for series maintained by ().

 
Page updated 2019-10-06
Handle: RePEc:cep:stieop:021