Micro-finance Competition: Motivated Micro-lenders, Double-dipping and Default
نویسندگان
چکیده
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. Key-words: Micro-finance competition; motivated MFIs; double-dipping; default. JEL Classification No.: C72, D40, D82, G21 ————————————– ∗Department of Economics, Singapore Management University, 90 Stamford Road, Singapore 178903. E-mail: [email protected]. Phone: (65)68280289. Fax: (65)68280833. *Manuscript( Include title, author names and affiliations on page 1 ) Click here to view linked References
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