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Recent advances in lending to the poor with asymmetric information

Emilios C. Galariotis (), Christophe Villa () and Nurmukhammad Yusupov
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Emilios C. Galariotis: Audencia Recherche - Audencia Business School
Christophe Villa: Audencia Recherche - Audencia Business School

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Abstract: Microfinance institutions have successfully extended unsecured small loans to poor and opaque borrowers at the bottom of the economic pyramid. This success is largely due to innovative financial contracts that impose joint liability and create dynamic incentives to mitigate the effects of asymmetric information. Given recent advances in microfinance contracts, there is a need to map the theoretical developments. This paper aims to accomplish that, by performing a critical literature survey of microlending contracts, focusing on joint liability and dynamic incentives, bringing out some of the deficiencies of contract-theoretic propositions that cannot effectively account for the social mission of microfinance.

Keywords: Joint liability; Microlending contracts; Dynamic incentives; Microfinance; Microcredit (search for similar items in EconPapers)
Date: 2011-08-05
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Published in The Journal of Development Studies, Taylor & Francis (Routledge), 2011, pp.1. ⟨10.1080/00220388.2010.527956⟩

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DOI: 10.1080/00220388.2010.527956

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