The Elasticity of Demand for Microcredit: Evidence from Latin America

Development Policy Review, Forthcoming

37 Pages Posted: 21 Jul 2010 Last revised: 5 Jun 2015

See all articles by Vicki L. Bogan

Vicki L. Bogan

Cornell University

Calum G. Turvey

Cornell University - School of Applied Economics and Management

Gabriela Salazar

Cornell University

Multiple version iconThere are 2 versions of this paper

Date Written: April 30, 2015

Abstract

Although microcredit demand is frequently assumed to be inelastic, understanding the price elasticity of demand for microcredit is exceptionally relevant in designing appropriate microfinance institution (MFI) financial products and policy. Using a unique survey instrument, this paper extracts loan demand schedules and elasticities of MFI borrowers in the Dominican Republic. We analyze the intensive margin of microcredit demand and find that client demand elasticities are not homogeneous and are correlated with certain borrower characteristics. Overall, results suggest that these micro-entrepreneurs, who have already entered the MFI market, have close to unit elastic demand for microcredit. The mean demand elasticity for our sample is -1.0.

Keywords: Microcredit, Demand elasticity

JEL Classification: G21, O16

Suggested Citation

Bogan, Vicki L. and Turvey, Calum G. and Salazar, Gabriela, The Elasticity of Demand for Microcredit: Evidence from Latin America (April 30, 2015). Development Policy Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1646048 or http://dx.doi.org/10.2139/ssrn.1646048

Vicki L. Bogan (Contact Author)

Cornell University ( email )

Warren Hall
Ithaca, NY 14853
United States
607-254-7219 (Phone)

Calum G. Turvey

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

Gabriela Salazar

Cornell University ( email )

Ithaca, NY 14853
United States

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