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The Elasticity of Demand for Microcredit: Evidence from Latin America
Author(s) -
Bogan Vicki L.,
Turvey Calum G.,
Salazar Gabriela
Publication year - 2015
Publication title -
development policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.671
H-Index - 61
eISSN - 1467-7679
pISSN - 0950-6764
DOI - 10.1111/dpr.12131
Subject(s) - microfinance , price elasticity of demand , economics , elasticity (physics) , homogeneous , loan , demand curve , demand shock , margin (machine learning) , monetary economics , financial institution , on demand , labour economics , microeconomics , macroeconomics , commerce , economic growth , materials science , physics , machine learning , computer science , composite material , thermodynamics
Microcredit demand is frequently assumed to be inelastic, yet understanding the price elasticity of demand for microcredit is highly relevant in designing appropriate microfinance institution ( MFI ) financial products and policy. This article extracts loan demand schedules and elasticities of MFI borrowers in the Dominican Republic using a unique survey instrument. We analyse the intensive margin of microcredit demand and find that client demand elasticities are not homogeneous and are correlated with certain borrower characteristics. Overall results suggest that these micro‐entrepreneurs, who have already entered the MFI market, have close to unit elastic demand for microcredit. The mean demand elasticity for our sample is ‐1.0.