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Recent Advances in Lending to the Poor with Asymmetric Information

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  • Emilios Galariotis
  • Christophe Villa
  • Nurmukhammad Yusupov

Abstract

Microfinance institutions have successfully extended unsecured small loans to poor and opaque borrowers at the bottom of the economic pyramid. This success is largely due to innovative financial contracts that impose joint liability and create dynamic incentives to mitigate the effects of asymmetric information. Given recent advances in microfinance contracts, there is a need to map the theoretical developments. This article aims to accomplish that by performing a critical literature survey of microlending contracts, focussing on joint liability and dynamic incentives, bringing out some of the deficiencies of contract-theoretic propositions that cannot effectively account for the social mission of microfinance.

Suggested Citation

  • Emilios Galariotis & Christophe Villa & Nurmukhammad Yusupov, 2011. "Recent Advances in Lending to the Poor with Asymmetric Information," Journal of Development Studies, Taylor & Francis Journals, vol. 47(9), pages 1371-1390, July.
    • Handle: RePEc:taf:jdevst:v:47:y:2011:i:9:p:1371-1390
    DOI: 10.1080/00220388.2010.527956
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    2. Muhammad Arslan Nawaz & Asif Ali Khan & Usman Khalid & Andreas Buerkert & Martin Wiehle, 2019. "Superfruit in the Niche—Underutilized Sea Buckthorn in Gilgit-Baltistan, Pakistan," Sustainability, MDPI, vol. 11(20), pages 1-22, October.
    3. Ayi Gavriel Ayayi, 2012. "Microfinance: A Time to Deliberate," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(3), pages 445-447, July.
    4. Beatriz Cu鬬ar-Fernᮤez & Yolanda Fuertes-Call鮠 & Carlos Serrano-Cinca & Bego uti鲲ez-Nieto, 2016. "Determinants of margin in microfinance institutions," Applied Economics, Taylor & Francis Journals, vol. 48(4), pages 300-311, January.
    5. Raja Usman Khalid & Stefan Seuring, 2019. "Analyzing Base-of-the-Pyramid Research from a (Sustainable) Supply Chain Perspective," Journal of Business Ethics, Springer, vol. 155(3), pages 663-686, March.
    6. Gashaw Tadesse Abate & Carlo Borzaga & Carlo Borzaga, 2014. "Cost efficiency and outreach of microfinance institutions in Ethiopia: Do they contrast with financial cooperatives?," Euricse Working Papers 1465, Euricse (European Research Institute on Cooperative and Social Enterprises).
    7. Gashaw Tadesse Abate & Carlo Borzaga & Kindie Getnet, 2013. "Financial sustainability and outreach of microfinance institutions in Ethiopia: does organizational form matter?," Euricse Working Papers 1356, Euricse (European Research Institute on Cooperative and Social Enterprises).
    8. Uddin, Md Hamid & Akter, Shabiha & Mollah, Sabur & Al Mahi, Masnun, 2022. "Differences in bank and microfinance business models: An analysis of the loan monitoring systems and funding sources," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    9. Anton Shevchenko & Xiaodan Pan & Goran Calic, 2020. "Exploring the effect of environmental orientation on financial decisions of businesses at the bottom of the pyramid: Evidence from the microlending context," Business Strategy and the Environment, Wiley Blackwell, vol. 29(5), pages 1876-1886, July.

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