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May microcredit lead to inclusion?

Djaffar Lessy, Nahla Dhib (), Francine Diener and Marc Diener
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Francine Diener: Equipe de Probabilité et Statistique - LJAD - Laboratoire Jean Alexandre Dieudonné - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur
Marc Diener: Equipe de Probabilité et Statistique - LJAD - Laboratoire Jean Alexandre Dieudonné - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur

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Abstract: We consider a Markov-Chain model for a Microfinance Institution (MFI) borrower who can be in one of four states: Applicant (A), Beneficiary (B − or B +) of a small or a large loan, or included (I) in the regular banking system. Given the transition matrix we compute the equilibrium and deduce the influence of probability parameters on what is profitable to the borrower within breaking-even constraints of the MFI. We give a general theorem on the total expected actualized income of a Markov Chain with Income (MCI), that we then apply to our model to determine the constrains emerging from Absence of Strategic Default (ASD) requirements. These do not only bound the probabilities from above but sometimes also from below.

Keywords: Micro-credit; Markov Chain with Income; financial inclusion; Absence of Strategic Default JEL codes: C02; D24; G21; L26 (search for similar items in EconPapers)
Date: 2020-08-11
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-mfd
Note: View the original document on HAL open archive server: https://hal.science/hal-02914031v1
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