Lending Technologies, Competition, and Consolidation in the Market for Microfinance in Bolivia

Jonathan Conning, Sergio Navajas and Claudio Gonzalez-Vega

No 213, Economics Working Paper Archive at Hunter College from Hunter College Department of Economics

Abstract: Innovations in lending technologies and market saturation have transformed La Paz, Bolivia into one of the most rapidly changing and competitive microfinance markets in the world. Two lenders stand out in this context: the pioneer BancoSol, which first entered and profitably expanded the loan market with a group liability loans, and the later entrant Caja Los Andes, which offered individual liability loans using costlier screening methods. In this paper we use a simple model of moral hazard and adverse selection to describe and analyze the nature of the competition amongst these lenders. We focus on how the terms of different loan contracts change with competition and how this affects borrowers' decisions about diligence and repayment. The hypothesized patterns of behavior are tested and shown to be consistent with empirical evidence from loan records and household survey data.

Keywords: Microfinance; Financial intermediation; poverty. (search for similar items in EconPapers)
JEL-codes: D0 G1 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2003-04-01
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (55)

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Journal Article: Lending technologies, competition and consolidation in the market for microfinance in Bolivia (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:htr:hcecon:213

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