Good intentions pave the way to … the local moneylender

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractMicroborrowers may take usurious loans to repay a loan taken from a microfinance institution because of having neglected the time inconsistency of optimal plans or having discounted future payoffs too strongly from the ex-post perspective. Microfinance programs should strive at preventing such consequences of bounded rationality.JEL classification: G21, D91

The density of microfinance institutions and multiple borrowing in Ghana: Are rural borrowers vulnerable?

“…Notably, when the number of clients was just about a fifth of the current estimation, earlier investigations into MFI operations suggested warning signs of multiple borrowing in the country (Grammling, 2009). Evidence also suggests that increased borrowing leads to repayment problems and a cyclical debt trap (Arnold & Booker, 2013; McIntosh & Wydick, 2005). Unsurprisingly, within a decade of the initial warning of multiple borrowing, the industry confronted another regulatory intervention to maintain confidence and discipline in microfinance operations and to ameliorate commercial excesses in the market 9 .…”

Regulating Over‐indebtedness: Local State Power in Cambodia's Microfinance Market

“…Critics must better attend to those varied institutional landscapes, underpinned by specific social norms and historical practices (Guérin and Kumar, 2017), in order to identify appropriate reforms likely to succeed in regulating microfinance. A first place to start would be to ‘move beyond borrower‐centric frames’ of over‐indebtedness (Bylander et al., 2019: O154), such as explaining multiple borrowing as an outcome of naïve decision making (Arnold and Booker, 2013). Such apolitical arguments, devoid of the diverse power relations that constitute microfinance markets, are likely to blame borrowers who are navigating economic transformations often stacked against them.…”

A Cambodian smallholder farmer's choice between microfinance institutes and informal commercial moneylenders: the role of risk attitude

“…Why is informal lending in rural areas still so strong? Some answers have already been provided by previous publications, such as the need for short-term loans to be able to repay formal credits (Arnold and Booker, 2013; Phlong, 2009) or the fact that informal lenders provide fast and discrete access to loans (Renzenbrink, 2013). MFIs are further criticized for their inflexible credit schedules and complex regulatory procedures (Song, 2013; Weber and Musshoff, 2012).…”

“…One of the original aims of microcredit was the replacement of informal commercial moneylenders, who are often accused of charging usurious interest rates which could be considered to be harmful for borrowers. Ironically, various authors suggest that microfinancing is rather a catalyst than an inhibitor for these harmful moneylenders: Their business flourishes wherever microfinance institutes [MFIs] emerge (Arnold and Booker, 2013; Phlong, 2009). In the Chinese context, Turvey and Kong (2010) observe that informal ties tend to crowd out rural credit cooperatives and MFIs.…”