The Elasticity of Demand for Microcredit: Evidence from Latin America

33 Pages Posted: 7 Oct 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: November 2015

Abstract

Microcredit demand is frequently assumed to be inelastic, yet understanding the price elasticity of demand for microcredit is highly relevant in designing appropriate microfinance institution (MFI) financial products and policy. This article extracts loan demand schedules and elasticities of MFI borrowers in the Dominican Republic using a unique survey instrument. We analyse 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

Suggested Citation

Bogan, Vicki L. and Turvey, Calum G. and Salazar, Gabriela, The Elasticity of Demand for Microcredit: Evidence from Latin America (November 2015). Development Policy Review, Vol. 33, Issue 6, pp. 725-757, 2015, Available at SSRN: https://ssrn.com/abstract=2670301 or http://dx.doi.org/10.1111/dpr.12131

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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