nep-mfd 2025-03-17 papers

on Microfinance

Issue of 2025–03–17
two papers chosen by
Marco Novarese, Università degli Studi del Piemonte Orientale

Consumer Surplus with Incomplete Markets : Applications to Savings and Microfinance By Loeser, John Ashton
Matching for Credit: Identifying information asymmetries in joint-liability lending By Klein, Thilo

Consumer Surplus with Incomplete Markets : Applications to Savings and Microfinance

By:	Loeser, John Ashton
Abstract:	The household welfare gains from financial inclusion are empirically elusive. This paper establishes that household welfare gains from a financial technology are equal to the area under dynamically compensated demand in a household model with incomplete financial markets, and general technology, preferences, and choice sets. This paper then estimates compensated demand for financial technologies leveraging three randomized control trials that introduce experimental variation in interest rates. Welfare gains per dollar lent or saved are small as compensated demand elasticities are large, but still correspond to large aggregate welfare gains from financial inclusion.
Date:	2023–06–12
URL:	https://d.repec.org/n?u=RePEc:wbk:wbrwps:10481

Matching for Credit: Identifying information asymmetries in joint-liability lending

By:	Klein, Thilo
Abstract:	Microcredit, a financial tool providing uncollateralized loans to low-income individuals, has seen a shift from joint-liability (JL) to individual liabil- ity (IL) lending models. This article tests a theory explaining this shift, focusing on borrowers matching into groups exposed to similar economic shocks under JL, diminishing its effectiveness. I reconcile conflicting theo- retical predictions and propose an empirical strategy to distinguish adverse selection from moral hazard effects. Using data from Thailand, I find that increasing diversity within borrower groups leads to a 10 percentage point improvement in timely repayment. These results inform contract design and strategies to reduce information asymmetries in lending practices
Keywords:	microcredit, joint liability, diversification, market design, stable matching, endogeneity, selection model, agriculture, Thailand
JEL:	C11 C31 C34 C36 C78 C57 D02 D47 D82 G21 O16 Q14
Date:	2024
URL:	https://d.repec.org/n?u=RePEc:zbw:zewdip:312189

This nep-mfd issue is ©2025 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.

General information on the NEP project can be found at https://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.

NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.