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Microfinance and missing markets
Author(s) -
Shahe Emran M.,
Mahbub Morshed A. K. M.,
Stiglitz Joseph E.
Publication year - 2021
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12502
Subject(s) - microfinance , imperfect , interest rate , loan , joint and several liability , spurious relationship , economics , business , monetary economics , liability , finance , economic growth , linguistics , philosophy , machine learning , tort , computer science
The existing theoretical analysis of microfinance focuses on the nature of the loan contract such as group liability. We draw attention to the role of missing or imperfect labour markets in understanding some of the important “second generation” debates in microfinance. Our analysis helps explain a number of puzzles in microfinance including high repayment rates with high interest rates, difficulties in scaling up projects, limited economic impact on borrowing households, low take‐up rates in recent microcredit programs, conflicting views about the interest rate elasticity of demand, and spurious mission drift. Microcredit can play a role when labour markets are underdeveloped, but it may also hinder structural transformation.