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

Renaud Bourlès (), Anastasia Cozarenco, Dominique Henriet and Xavier Joutard

No 15-030, Working Papers CEB from ULB -- Universite Libre de Bruxelles

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)
JEL-codes: C34 C41 D82 G21 (search for similar items in EconPapers)
Pages: 45 p.
Date: 2015-07-07
New Economics Papers: this item is included in nep-ban and nep-mfd
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Related works:
Journal Article: Business Training with a Better-Informed Lender: Theory and Evidence from Microcredit in France (2022) Downloads
Working Paper: Business Training with a Better-Informed Lender: Theory and Evidence from Microcredit in France (2022) Downloads
Working Paper: BUSINESS TRAINING WITH A BETTER-INFORMED LENDER (2022)
Working Paper: Business Training and Loan Repayment: Theory and Evidence from Microcredit in France (2018) Downloads
Working Paper: Business Training and Loan Repayment: Theory and Evidence from Microcredit in France (2018) Downloads
Working Paper: Business Training Allocation and Credit Scoring: Theory and Evidence from Microcredit in France (2015) Downloads
Working Paper: Business Training Allocation and Credit Scoring: Theory and Evidence from Microcredit in France (2015) Downloads
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