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American Economic Review: Vol. 98 No. 3 (June 2008)
AER Volume. 98, Issue 3 | 
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AER Forthcoming Articles
Credit Elasticities in Less-Developed Economies: Implications for Microfinance
Article Citation
Karlan, Dean S., and
Jonathan Zinman. 2008. "Credit Elasticities in Less-Developed Economies: Implications for Microfinance."
American Economic Review,
98(3): 1040-68.
DOI: 10.1257/aer.98.3.1040
DOI: 10.1257/aer.98.3.1040
Abstract
Policymakers often prescribe that microfinance institutions increase
interest rates to eliminate their reliance on subsidies. This strategy
makes sense if the poor are rate insensitive: then microlenders increase
profitability (or achieve sustainability) without reducing the poor's
access to credit. We test the assumption of price inelastic demand using
randomized trials conducted by a consumer lender in South Africa. The
demand curves are downward sloping, and steeper for price increases
relative to the lender's standard rates. We also find that loan size is
far more responsive to changes in loan maturity than to changes in
interest rates, which is consistent with binding liquidity constraints.
Article Full-Text Access
Full-text Article
Additional Materials
Download Data Set (2.24 MB) | Link to Appendix (240.44 KB)
Authors
Karlan, Dean S. (Yale U)
Zinman, Jonathan (Dartmouth College)
Zinman, Jonathan (Dartmouth College)
JEL Classifications
G21: Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
O15: Economic Development: Human Resources; Human Development; Income Distribution; Migration
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
O15: Economic Development: Human Resources; Human Development; Income Distribution; Migration
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
