"MFI competition in the presence of moneylenders: Theory and Evidence" by Dr. Prabal Ray Chaudhuri | Shiv Nadar University

"MFI competition in the presence of moneylenders: Theory and Evidence" by Dr. Prabal Ray Chaudhuri

Event Date: 
Friday, September 7, 2018 -
12:3013:45

We consider a framework where there is one borrower, and two sources of funds, MFIs and moneylenders. We begin by building a dynamic model where the essential problem is one of strategic default by the borrower, the MFIs provide production loans, and the moneylenders provide consumption loans - thus providing a reason as to why moneylenders continue to flourish despite increasing MFI penetration, which is contrary to what many practitioners expected.  We then show that with increasing MFI competition, the aggregate loans from MFIs decrease, while that from moneylenders increase. Further, the rate of interest charged by the moneylenders decline. We find that these predictions are consistent with our survey results in Bangladesh. 

Friday 07, Sep 2018
12:30 PM - 01:45 PM
D302

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