Microcredit refers to small loans to borrowers who typically lack collateral, steady employment, or a verifiable credit history. It is designed not only for start-ups but also for individuals. The microcredit industry is experiencing fast growth in China. In contrast with traditional loans,...

We propose a new approach to studying the pass-through of credit expansion policies that focuses on frictions, such as asymmetric information, that arise in the interaction between banks and borrowers. We decompose the effect of changes in banks' cost of funds on aggregate borrowing into the...