Franchising microfinance

Bubna, A and Chowdhry, B (2010) Franchising microfinance. Review of Finance, 14 (3). pp. 451-476.

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Abstract

Financial intermediaries worldwide are seeking mechanisms for participating in micro lending. Using informed "local capitalists" as bank's on-lenders fails due to borrowers' incentive to default with multiple credit sources. A coalition of local capitalists may not resolve the problem in the presence of a monopoly moneylender with superior skills in lending and enforcement. A credible competitive threat to the moneylender can only arise if the local capitalist coalition also provides information sharing benefits that lower their cost of lending vis - vis the moneylender. Franchising allows local capitalists to form such a coalition. We analyze conditions under which welfare-enhancing franchising would obtain. © The Author 2010. Published by Oxford University Press.

ISB Creators:
ISB CreatorsORCiD
Bubna, AUNSPECIFIED
Item Type: Article
Subjects: Finance
Depositing User: LRC ISB
Date Deposited: 29 Oct 2014 04:29
Last Modified: 29 Oct 2014 04:29
URI: http://eprints.exchange.isb.edu/id/eprint/53
Publisher URL: http://dx.doi.org/10.1093/rof/rfp005
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