PERFORMANCE DETERMINANTS FOR INDIVIDUAL MICROLENDING TECHNOLOGY
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Abstract
Increasingly, microfinance institutions are including individual microlending as part of their loan portfolios, and this has been said to be a positive development in the microfinance mission. In this study, we build a borrower’s simple decision model in a context of asymmetric information in order to analyze individual microlending (IML) technology and its ability to contribute to development by financing microenterprises, overcoming the limitations of group microlending. We conclude that the collection system holds the key to resolving the problems of adverse selection and moral hazard, although this has not been referred to in previous studies. Our finding are that IML technology is inefficient in offering a product at a cost that might be compatible with microenterprises’ average profitability, and therefore they choose not to use it. We provide possible reasons to explain why this technology is more expensive and poses a greater risk than traditional group lending.
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How to Cite
Castillo Polanco, L. A. (2019). PERFORMANCE DETERMINANTS FOR INDIVIDUAL MICROLENDING TECHNOLOGY. Investigación Económica, 72(285). Retrieved from https://revistas.unam.mx/index.php/rie/article/view/50494
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