Franchising Microfinance*

Bubna, A and Chowdhry, B (2009) Franchising Microfinance*. Review of Finance, 14 (3). pp. 451-476. ISSN 1572-3097

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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-à-vis the moneylender. Franchising allows local capitalists to form such a coalition. We analyze conditions under which welfare-enhancing franchising would obtain.

Item Type: Article
Additional Information: The research article was published by the author with the affiliation of UCLA Anderson School
Subjects: Finance
Date Deposited: 03 Aug 2023 19:51
Last Modified: 03 Aug 2023 19:51

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