Microfinance has been on the development agenda for more than 30 years, heralded as the wondrous tool that reduces poverty and empowers women (Hulme and Mosley, 1996; Rutherford, 2001; Morduch and Haley, 2002; Khandker, 1998). Doubts, however, have recently been raised about the success of microfinance...

This paper explores the role of diversification and size in protecting information. We present a simple two period credit market with a sophisticated lender faced with competitors who free ride on his screening activity. Absent commitment problems, the lender funds one borrower and exerts...