This paper originates from the current move to individual-based lending systems by many microfinance institutions and the fear that this move will lead to a decrease in access to credit for the poor. More specifically, the paper examines how an individual-based lending scheme can be devised such...

This note argues that the joint liability contracting equilibria worked out in Ghatak(2000) have a serious drawback in that, even though incentive compatible ex ante, they violate ex post rationality. For such contracts to be feasible, banks should be able to extract more under failure than...

We show that the joint liability lending contracts derived in <link rid="b4">Ghatak (2000)</link> violate an "ex post" incentive-compatibility constraint which says that the amount of joint liability cannot exceed the amount of individual liability. We derive and characterise optimal separating joint liability...

It is now stylized that, while the impact of ownership on firm productivity is unclear, product market competition can be expected to have a positive impact on productivity, thereby making entry (or contestability of markets) desirable. Traditional research in the context of entry has explored...

It is now stylized that, while the impact of ownership on firm productivity is unclear, product market competition can be expected to have a positive impact on productivity, thereby making entry (or contestability of markets) desirable. Traditional research in the context of entry has explored...

In this paper, we study why multiple banks lend to the same project even though they are not constrained by the availability of funds. The choice of the amount of debt, as well as the hierarchy of debt claim is endogenized. We find that the hierarchy among the creditors is exclusively determined...

In a general equilibrium model with risk neutral and risk averse agents, we show that if banks issue both demand deposits and equity, then free banking is run-proof and efficient. In particular, we obtain the first best insurance solution if there is adequate risk neutral capital. If sufficient...

In this paper, we study why multiple banks lend to the same project even though they are not constrained by the availability of funds. The choice of the amount of debt, as well as the hierarchy of debt claim is endogenized. We find that the hierarchy among the creditors is exclusively determined...