Found 2 article(s) for author 'micro-finance'

Does the Classic Microfinance Model Discourage Entrepreneurship Among the Poor? Experimental Evidence from India

Does the Classic Microfinance Model Discourage Entrepreneurship Among the Poor? Experimental Evidence from India, Rohini Pande, January 2013, Paper, “Do the repayment requirements of the classic microfinance contract inhibit investment in high-return but illiquid business oppor- tunities among the poor? Using a field experiment, we compare the classic contract which requires that repayment begin immediately after loan disbursement to a contract that includes a two-month grace period. The provision of a grace period increased short-run business investment and long-run profits but also default rates. The results, thus, indicate that debt contracts that require early re- payment discourage illiquid risky investment and thereby limit the potential impact of microfinance on microenterprise growth and household poverty.” Link

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Repayment Frequency and Default in Micro-Finance: Evidence from India

Repayment Frequency and Default in Micro-Finance: Evidence from India, Erica Field, Rohini Pande, January 2008, Paper. “In stark contrast to bank debt contracts, most micro-finance con- tracts require that repayments start nearly immediately after loan disbursement and occur weekly thereafter. Even though economic theory suggests that a more flexible repayment schedule would benefit clients and potentially improve their repayment capacity, micro- finance practitioners argue that the fiscal discipline imposed by frequent repayment is critical to preventing loan default. In this paper we use data from a field experiment which randomized client assignment to a weekly or monthly repayment schedule and find no significant effect of type of repayment schedule on client delinquency or default.” Link

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