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Market structure and borrower welfare in microfinance

Fetzer, Thiemo and de Quidt, Jonathan (2012) Market structure and borrower welfare in microfinance. Economic Organisation and Public Policy Discussion Papers (EOPP 040). The London School of Economics and Political Science, Suntory and Toyota International Centres for Economics and Related Disciplines, London, UK.

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Abstract

Motivated by recent controversies surrounding the role of commercial lenders in microfinance, we analyze borrower welfare under different market structures, considering a benevolent non-profit lender, a for-profit monopolist, and a competitive credit market. To understand the magnitude of the effects analyzed, we simulate the model with parameters estimated from the MIX Market database. Our results suggest that market power can have severe implications for borrower welfare, while despite possible information frictions competition typically delivers similar borrower welfare to non-profit lending. In addition, for-profit lenders are less likely to use joint liability than non-profits.

Item Type: Monograph (Report)
Official URL: http://sticerd.lse.ac.uk/dps/eopp/eopp40.pdf
Additional Information: © 2012 The Authors
Divisions: STICERD
Subjects: H Social Sciences > HB Economic Theory
JEL classification: I - Health, Education, and Welfare > I3 - Welfare and Poverty > I31 - General Welfare; Basic Needs; Living Standards; Quality of Life; Happiness
I - Health, Education, and Welfare > I3 - Welfare and Poverty > I38 - Government Policy; Provision and Effects of Welfare Programs
Sets: Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 23 Jul 2014 10:41
Last Modified: 29 Mar 2019 00:02
Funders: University of Warwick
URI: http://eprints.lse.ac.uk/id/eprint/58164

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