Business Training Allocation and Credit Scoring: Theory and Evidence from Microcredit in France

Renaud Bourlès (), Anastasia Cozarenco, Dominique Henriet and Xavier Joutard ()
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Anastasia Cozarenco: CERMi - Centre for European Research in Microfinance, ULB - Université libre de Bruxelles, SBS-EM, Centre Emile Bernheim - ULB - Université libre de Bruxelles - SBS-EM
Xavier Joutard: UL2 - Université Lumière - Lyon 2, GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique

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Abstract: The microcredit market, where inexperienced micro-borrowers meet experienced microfinance institutions (MFIs), is subject to reversed asymmetric information. Thus, MFIs' choices can shape borrowers' beliefs and their behavior. We analyze how this mechanism may influence microfinance institution decisions to allocate business training. By means of a theoretical model, we show that superior information can lead the MFI not to train (or to train less) riskier borrowers. We then investigate whether this mechanism is empirically relevant, using data from a French MFI. Confirming our theoretical reasoning, we find a non-monotonic relationship between the MFI's decision to train and the risk that micro-borrowers represent.

Keywords: microcredit; reversed asymmetric information; looking-glass self; bivariate probit; scoring model (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-ban, nep-ger and nep-mfd
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01171949v2
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Working Paper: Business Training Allocation and Credit Scoring: Theory and Evidence from Microcredit in France (2015)
Working Paper: Business Training Allocation and Credit Scoring: Theory and Evidence from Microcredit in France (2015)
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