File2-page117 - Morduch (1999) & Microfinance...

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Unformatted text preview: Morduch (1999) & Microfinance Literature Credit and Microfinance NGOs are typically non-profit – whole rationale is to reach poor – derive utility from this – note that if same can be said about local versus central government – then argument for decentralisation of credit provision – main role of central government – to provide fiscal resources and complimentary inputs (ii) better at dealing with informational and enforcement problems for two main reasons (a) Endogenous Group formation: choose reliable partners – bad credit risks excluded (b) peer monitoring – monitor activities of other group members given the incentives to do so – that is, microfinance combines advantages of NGOs and informal credit organisations what are some of their drawbacks (i) subsidies still involved (see Morduch, 1999) (ii) short on outreach – may not reach poorest of the poor which may be the least profitable to lend to (iii) placement of microfinance organizations up to NGO – may not reach most backward areas as cost of reaching those in these areas is the highest (iv) relies on frequent repayment – this may not work well for agriculture where returns to investment occur with a long lag Social Banking Are state-led credit programs central to encouraging growth and fighting poverty? State interventions in credit markets common in less developed countries Pro: lack of access to credit limits ability of poor to engage in productive activities and exit poverty Con: programs subject to elite capture and may actually worsen terms for the poor in rural credit markets. Development Economics, LSE Summer School 2007 114 ...
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This note was uploaded on 12/29/2011 for the course ECO 307 taught by Professor Dublin during the Spring '10 term at SUNY Stony Brook.

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