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Pré-Publication, Document De Travail Année : 2019

Mission Drift in Microcredit: A Contract Theory Approach

Résumé

We analyze the relationship between Microfinance Institutions (MFIs) and external funding institutions, with the aim of contributing to the debate on “mission drift” (the tendencyfor MFIs to lend money to wealthier borrower rather than to the very poor). We suggestthat funding institutions build incentives for MFIs to choose the adequate share of poorerborrowers and to exert effort to increase the quality of the funded projects. We show thatasymmetric information on both the effort level and its cost may increase the share of richerborrowers. However the unobservability of the cost of effort has an ambiguous effect. Itpushes efficient MFIs to serve a higher share of poorer borrowers, while less efficient onesdecrease their poor outreach.
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Dates et versions

hal-02304352 , version 1 (03-10-2019)

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  • HAL Id : hal-02304352 , version 1

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Sara Biancini, David Ettinger, Baptiste Venet. Mission Drift in Microcredit: A Contract Theory Approach. 2019. ⟨hal-02304352⟩
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