Publication Type
Working Paper
Version
publishedVersion
Publication Date
1-2013
Abstract
We develop a tractable model of competition among motivated MFIs. We find that equilibria may or may not involve double-dipping (and consequently default), with there being double-dipping whenever the MFIs are very profit-oriented. Moreover, in an equilibrium with double-dipping, borrowers who double-dip are actually worse off compared to those who do not. Further, for intermediate levels of motivation, there can be multiple equilibria, with a doubledipping equilibrium co-existing with a no default equilibrium. Interestingly, an increase in MFI competition can lower efficiency, as well as increase the extent of double-dipping and default. Further, the interest rates may go either way, with the interest rate likely to increase if the MFIs are very motivated.
Keywords
Micro-finance competition, motivated MFIs, double-dipping, default
Discipline
Finance
Research Areas
Applied Microeconomics
First Page
1
Last Page
36
Publisher
SMU Economics and Statistics Working Paper Series, No. 04-2012
City or Country
Singapore
Citation
GUHA, Brishti and ROY CHOWDHURY, Prabal.
Micro-finance Competition: Motivated Micro-lenders, Double-dipping and Default. (2013). 1-36.
Available at: https://ink.library.smu.edu.sg/soe_research/1326
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
Published in Journal of Comparative Economics https://doi.org/10.1016/j.jdeveco.2013.07.006