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Learning and microlending
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Drugov, Mikhail and Macchiavello, Rocco (2008) Learning and microlending. In: CEPR Development Economics Conference, LSE, London, 3-4 Oct 2008 (Unpublished)
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Official URL: http://www.econ.ed.ac.uk/papers/Drugov_Rocco.pdf
Abstract
For many self-employed poor in the developing world, entrepreneurship involves experimenting with new technologies and learning about oneself. This paper explores the (positive and normative) implications of learning for the practice of lending to the poor. The optimal lending contract rationalizes several common aspects of microlending schemes, such as "mandatory saving requirements", "progressive lending"and "group funds". Joint liability contracts are, however, not necessarily optimal. Among the poorest borrowers the model predicts excessively high retention rates, the contemporaneous holding of borrowing and savings at unfavorable interest rates as well as the failure to undertake profitable and easily available investment opportunities, such as accepting larger loans to scale-up business. Further testable predictions can be used to interpret and guide the design of controlled field experiments to evaluate microlending schemes.
Item Type: | Conference Item (Paper) | ||||
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Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Official Date: | 3 October 2008 | ||||
Dates: |
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Status: | Not Peer Reviewed | ||||
Publication Status: | Unpublished | ||||
Version or Related Resource: | Drugov, Mikhail and Macchiavello, Rocco (2008). Learning and microlending. In: Invited Speaker : Department of Economics, Edinburgh University. Edinburgh, 6 Oct 2008. | ||||
Conference Paper Type: | Paper | ||||
Title of Event: | CEPR Development Economics Conference | ||||
Type of Event: | Conference | ||||
Location of Event: | LSE, London | ||||
Date(s) of Event: | 3-4 Oct 2008 | ||||
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