In many countries, Mutua lLoan-Guarantee Societies (MGSs) are assuming ever-increasing importance for small business lending. In this paper we provide a theory to rationalize the raison d’être of MGSs. The basic intuition is that the motivation for MGSs lies in the inefficiencies created by adverse selection, when borrowers do not have enough wealth to satisfy collatera lrequirements and induce self-selecting contracts. In this setting,we view MGSs as a wealth-pooling mechanism that allows otherwise inefficiently rationed borrowers to obtain credit.
Mutual loan-guarantee societies in monopolistic credit markets with adverse selection / Busetta, G.; Zazzaro, Alberto. - In: JOURNAL OF FINANCIAL STABILITY. - ISSN 1572-3089. - 8:(2012), pp. 15-24. [10.1016/j.jfs.2011.02.004]
Mutual loan-guarantee societies in monopolistic credit markets with adverse selection
ZAZZARO, Alberto
2012-01-01
Abstract
In many countries, Mutua lLoan-Guarantee Societies (MGSs) are assuming ever-increasing importance for small business lending. In this paper we provide a theory to rationalize the raison d’être of MGSs. The basic intuition is that the motivation for MGSs lies in the inefficiencies created by adverse selection, when borrowers do not have enough wealth to satisfy collatera lrequirements and induce self-selecting contracts. In this setting,we view MGSs as a wealth-pooling mechanism that allows otherwise inefficiently rationed borrowers to obtain credit.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.