This paper is the product of a research project conducted in 2005–2006 by the University of Bergamo, the Università del Piemonte Orientale and the Giordano Dell'Amore Foundation, with the sponsorship of Fondazione CRT of Turin, coordinated by Roberta Rabellotti and Laura Viganò.
GEOGRAPHICAL DISTANCE AND MORAL HAZARD IN MICROCREDIT: EVIDENCE FROM COLOMBIA†
Article first published online: 25 FEB 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Journal of International Development
Volume 26, Issue 1, pages 91–108, January 2014
How to Cite
Presbitero, A. F. and Rabellotti, R. (2014), GEOGRAPHICAL DISTANCE AND MORAL HAZARD IN MICROCREDIT: EVIDENCE FROM COLOMBIA. J. Int. Dev., 26: 91–108. doi: 10.1002/jid.2901
- Issue published online: 5 JAN 2014
- Article first published online: 25 FEB 2013
- Manuscript Accepted: 21 DEC 2012
- Manuscript Revised: 13 DEC 2012
- Manuscript Received: 30 JAN 2012
- relationship lending
Recent years have seen an intense and critical debate about the impact of microcredit on entrepreneurial activities and poor households' welfare. This paper suggests that information asymmetries in the ex post loan arrangement between the microfinance institution and local borrowers could partially explain the limited impact of microcredit. The physical distance separating borrowers from the microfinance institution could be considered as a proxy of agency costs, increasing the costs of monitoring and easing moral hazard. The estimation of the effect of distance on the borrower's self-assessed outcome of a microcredit project in Colombia confirms the presence of moral hazard in the microcredit market, with agency costs increasing with geographical distance. Copyright © 2013 John Wiley & Sons, Ltd.