Microfinance games

Arbeitspapier

Microfinance has been heralded as an effective way to address imperfections in credit markets. From a theoretical perspective, however, the success of microfinance contracts has puzzling elements. In particular, the group-based mechanisms often employed are vulnerable to free-riding and collusion, although they can also reduce moral hazard and improve selection. We created an experimental economics laboratory in a large urban market in Lima, Peru and over seven months conducted eleven different games that allow us to unpack microfinance mechanisms in a systematic way. We find that risk-taking broadly conforms to predicted patterns, but that behavior is safer than optimal. The results help to explain why pioneering microfinance institutions have been moving away from group-based contracts. The work also provides an example of how to use framed field experiments as a methodological bridge between laboratory and field experiments.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Center Discussion Paper ; No. 936

Classification and Topics

• Classification: Wirtschaft ; Microeconomic Analyses of Economic Development ; Household Behavior: General ; Firm Behavior: Theory ; Asymmetric and Private Information; Mechanism Design ; Field Experiments
• Subject: microfinance ; group lending ; information asymmetries ; contract theory ; experimental economics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Giné, Xavier ; Jakiela, Pamela ; Karlan, Dean S. ; Morduch, Jonathan
• Event: Veröffentlichung
• (who): Yale University, Economic Growth Center
• (where): New Haven, CT
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/26977
• Last update: 10.03.2025, 11:41 AM CET