Increasing microfinance risk tolerance through revenue sharing: An experiment

Simple item page
dc.contributor.authorClark, Jeremy
dc.contributor.authorSpraggon, J
dc.date.accessioned2024-11-06T22:08:00Z
dc.date.available2024-11-06T22:08:00Z
dc.date.issued2021
dc.description.abstractMicrofinance has been found to be less effective for high risk/return borrowing groups. We report a group liability microfinance lab experiment that tests a mechanism to raise repayment rates among such borrowers. The mechanism offers partial revenue sharing among groups of borrowers, agreed to before individual business outcomes are realized and loan repayment is due. Such revenue sharing makes loan repayment optimal under more outcome states, increasing the expected benefit to each borrower of repayment to qualify for future loans. We further test the effect of allowing borrowers to renege on revenue sharing agreements after learning their business outcomes, prior to loan repayment decisions. Our results illustrate the problem that exogenously higher risk/return borrowing groups achieve lower loan repayment rates than lower risk/return borrowing groups. We find evidence that optional revenue sharing significantly increases high risk borrowers’ repayment rates, but that most of this gain is lost if they can renege on revenue sharing agreements.
dc.identifier.citationClark J, Spraggon J (2021). Increasing microfinance risk tolerance through revenue sharing: An experiment. Applied Economics. 54(17). 1912-1933.
dc.identifier.doihttp://doi.org/10.1080/00036846.2021.1983140
dc.identifier.issn0003-6846
dc.identifier.issn1466-4283
dc.identifier.urihttps://hdl.handle.net/10092/107484
dc.languageen
dc.publisherInforma UK Limited
dc.rightsAll rights reserved unless otherwise stated
dc.rights.urihttp://hdl.handle.net/10092/17651
dc.subject.anzsrc1402 Applied Economics
dc.subject.anzsrc1403 Econometrics
dc.subject.anzsrc1502 Banking, Finance and Investment
dc.subject.anzsrc35 - Commerce, management, tourism and services::3502 - Banking, finance and investment
dc.subject.anzsrc38 - Economics
dc.titleIncreasing microfinance risk tolerance through revenue sharing: An experiment
dc.typeJournal Article
uc.collegeUC Business School
uc.departmentDepartment of Economics and Finance
Files
Original bundle
Now showing 1 - 2 of 2
No Thumbnail Available
Name:
AppEconManuscriptRev[77].docx
Size:
192.04 KB
Format:
Microsoft Word
Description:
Accepted version
Download
No Thumbnail Available
Name:
AppendicesAB.docx
Size:
32.33 KB
Format:
Microsoft Word
Description:
Supporting information
Download
License bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
license.txt
Size:
3.17 KB
Format:
Plain Text
Description:
Download
Collections
Business: Journal Articles