Capacity, Patronage, and Exit from Mutual Credit

Georgy Lukyanov ()
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Georgy Lukyanov: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Member-owned lenders pool project returns and rebate surplus as patronage, insuring borrowers but tying membership value to pool composition. We study a capacityconstrained mutual alongside competitive market debt. Market access initially complements the mutual by financing rationed borrowers. Once capacity is broad enough, however, high-return members prefer individual debt to subsidizing the common pool and exit. Their departure frees capacity for low-return members but destroys risk sharing. Market access therefore raises welfare at low capacity and lowers it near full capacity: cream-skimming begins strictly before it becomes harmful. The mechanism survives incomplete pooling.

Keywords: mutual credit; patronage refunds; market access; credit rationing; risk sharing (search for similar items in EconPapers)
Date: 2026-11-04
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