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Business Training Allocation and Credit Scoring: Theory and Evidence from Microcredit in France

Abstract : The microcredit market, where inexperienced micro-borrowers meet experienced microfinance institutions (MFIs), is subject to reversed asymmetric information. Thus, MFIs' choices can shape borrowers' beliefs and their behavior. We analyze how this mechanism may influence microfinance institution decisions to allocate business training. By means of a theoretical model, we show that superior information can lead the MFI not to train (or to train less) riskier borrowers. We then investigate whether this mechanism is empirically relevant, using data from a French MFI. Confirming our theoretical reasoning, we find a non-monotonic relationship between the MFI's decision to train and the risk that micro-borrowers represent.
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https://halshs.archives-ouvertes.fr/halshs-01171949
Contributor : Charles Lai Tong <>
Submitted on : Thursday, July 9, 2015 - 2:17:47 PM
Last modification on : Wednesday, August 5, 2020 - 3:12:18 AM

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WP 2015 - Nr 26.pdf
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  • HAL Id : halshs-01171949, version 2

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Renaud Bourlès, Anastasia Cozarenco, Dominique Henriet, Xavier Joutard. Business Training Allocation and Credit Scoring: Theory and Evidence from Microcredit in France. 2015. ⟨halshs-01171949v2⟩

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