Compulsory versus Voluntary Savings as Incentive Mechanism in Microlending Contracts
Résumé
This paper investigates the incentive mechanism of individual microlending contracts focusing particularly on microsavings. We built a model to show the role of compulsory and voluntary microsavings in addressing problems of information asymmetries. We show that voluntary savings can serve as a complementary tool in repayment enforcement at the same time inducing borrowers to reveal abilities of their projects.
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