Microfinance institutions, despite the presence of competition and informational asymmetries, typically offer a limited variety of contracts. Assuming price competition, we propose a simple theoretical explanation for this behavior and study its consequences in terms of strategic interaction and...

Imperfect capital markets and commitment problems impede lumpy human capital investments. Labeled loans have been postulated as a potential solution to both constraints, but little is known about the role of the label in influencing investment choices in practice. We draw on a cluster randomized...

The ex ante theory of collateral states that better informed lenders, such as informal lenders, rely less on collateral. We test this by contrasting the use of collateral between formal and informal lenders in the same market. Indeed, formal lenders rely more often on collateral, controlling for...

If the demand for credit by the poor changes little when interest rates increase, lenders can raise fees to cost-covering levels without losing customers. This claim is at the core of sustainable microfinance strategies that aim to provide banking services to the poor while eschewing long-term...

I develop and estimate a dynamic equilibrium model of risky entrepreneurs' borrowing and savings decisions incorporating both formal and local-informal credit markets. Households have access to an exogenous formal credit market and to an informal credit market in which the interest rate is...

Rotating Savings and Credit Association (Rosca) is an important informal financial institution in many parts of the world used by participants to share income risks. What is the role of Rosca when formal credit market is introduced? We develop a model in which risk-averse participants attempt...

We offer a new test of the ex ante theory of collateral. Theory states that lenders rely less on collateral if they have better information about borrowers. We test this by contrasting the use of collateral between formal and – better informed – informal lenders in a developing financial...

Empirical evidence suggests that widespread financial distress, by disrupting enforcement of credit contracts, can be self-propagatory and adversely affect the supply of credit. We propose a unifying theory that models the interplay between enforcement, borrower default decisions, and the...

This paper examines whether recently introduced village funds", one of the largest microfinance programs ever implemented, improve access to finance. Village funds are analyzed in a cross-sectional approach in relation to competing financial institutions. We find, first, that they reach the...

Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The...