Borrower Runs

Microfinance institutions and other lenders in developing countries rely on the promise of future loans to induce repayment. However, if borrowers expect that others will default, and so loans will no longer be available in the future, then they will default as well. We refer to such contagion as a borrower run. The optimal lending contract must provide additional repayment incentives to counter this tendency to default.

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Year of publication:	2008-05
Authors:	Bond, Philip ; Rai, Ashok
Institutions:	Economics Department, Williams College

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Extent:	application/pdf
Series:	Department of Economics Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	published in Journal of Development Economics, March 2009, v. 88, iss. 2, pp. 185-91. The price is Free Number 2008-03 27 pages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005481910