A DYNAMIC MODEL OF MICROLENDING IN THE DEVELOPING COUNTRIES

Ani Katchova, Mario Miranda () and Claudio Gonzalez-Vega

No 20635, 2001 Annual meeting, August 5-8, Chicago, IL from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: In this paper, we examine the contract design problem of banks that extend loans to poor borrowers and seek to maximize outreach while remaining financially sustainable. A dynamic model is developed that shows how interest rates can be determined based on information about productivity and diligence characteristics of borrowers, investment opportunities, correlation of business activities, peer monitoring costs, and social sanctions. The results indicate that relative to the traditional static models, the dynamic model explains better the current experience in individual and group lending in developing countries.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 31
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea01:20635

DOI: 10.22004/ag.econ.20635

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