Is the Credit Worth it? For‐Profit Lenders in Microfinance with Rational and Behavioral Borrowers

25 Pages Posted: 25 Feb 2018

See all articles by Jonathan de Quidt

Jonathan de Quidt

Stockholm University - Institute for International Economic Studies (IIES)

Maitreesh Ghatak

London School of Economics (LSE) - Department of Economics

Date Written: March 2018

Abstract

The bulk of the literature on microcredit has focused on either not‐for‐profit lenders or assumes a perfectly competitive, zero‐profit market equilibrium. Yet the market has experienced a significant shift toward for‐profit lending and the assumptions of perfect competition are likely to be too strong in many locations. We review the state of the literature on for‐profit lending in microcredit, consider its implications for both conventionally ‘rational’ borrowers and for borrowers with behavioral biases, and point out directions for future research.

Keywords: Microcredit, for‐profit lending, behavioral borrowers

JEL Classification: O16, G21, D4, G41

Suggested Citation

de Quidt, Jonathan and Ghatak, Maitreesh, Is the Credit Worth it? For‐Profit Lenders in Microfinance with Rational and Behavioral Borrowers (March 2018). Annals of Public and Cooperative Economics, Vol. 89, Issue 1, pp. 175-199, 2018, Available at SSRN: https://ssrn.com/abstract=3129123 or http://dx.doi.org/10.1111/apce.12189

Jonathan De Quidt (Contact Author)

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden

Maitreesh Ghatak

London School of Economics (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom
44 20 7852 3568 (Phone)
44 20 7955 6951 (Fax)

HOME PAGE: http://sticerd.lse.ac.uk/dps/adds/ghatak/cv-lse-sept02.pdf

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