Microfinance and Missing Markets

M. Shahe Emran, Akm Morshed and Joseph Stiglitz

MPRA Paper from University Library of Munich, Germany

Abstract: The existing theoretical analysis of microfinance focuses on the nature of the loan contract such as group liability. We draw attention to the role of missing or imperfect labor market in understanding some of the important `second generation' debates in microfinance. Our analysis helps explain a number puzzles in microfinance such as (i) high repayment rates with high interest rates, (ii) difficulties in scaling up projects, (iii) conflicting views about interest rate elasticity of demand for microcredit. The analysis implies that while microcredit can play a vital role when labor markets are underdeveloped, demand for such loans may progressively decline as markets develop.

Keywords: Microfinance; Microcredit Puzzles; Labor Market; Missing Markets; High Interest Rate; Scaling Up; Interest Rate Elasticity of Microcredit; Progressive Lending; Structural Change (search for similar items in EconPapers)
JEL-codes: D13 D52 J23 J43 O12 O16 (search for similar items in EconPapers)
Date: 2011-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

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Related works:
Journal Article: Microfinance and missing markets (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:41451

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