Microcredit in Industrialized Countries: Unexpected Consequences of Regulatory Loan Ceilings
Anastasia Cozarenco and
No 16-021, Working Papers CEB from ULB -- Universite Libre de Bruxelles
Subsidized microfinance institutions (MFIs) provide affordable credit to small entrepreneurs. Many industrialized countries regulate MFIs. But in a market with accessible small business financing, regulatory loan ceilings can jeopardize the supply of microcredit to the most disadvantaged people. This is because small entrepreneurs in need of above-ceiling credit have the option to combine a ceiling-high microcredit with a supplementary loan from a regular bank. By reducing information asymmetry, this type of co-financing may prompt MFIs to divert credit away from entrepreneurs seeking below-ceiling loans. This study uses hand-collected data from a French MFI to test, and partly confirm, this theory.
Keywords: Microcredit; microfinance; regulation; loan ceiling; self-employment; entrepreneurs (search for similar items in EconPapers)
JEL-codes: G21 L51 G28 O52 L31 I38 C25 M13 (search for similar items in EconPapers)
Pages: 54 p.
New Economics Papers: this item is included in nep-ban, nep-dev, nep-ent and nep-mfd
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