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Managing Microfinance Institutions: Analyzing How Relationships Influence Entrepreneurial Behavior

  • Fernando A. Moya-DávilaEmail author
  • Ananya Rajagopal
Chapter

Abstract

Modern financial intermediation research has focused its attention on the role that relationship plays in the lender-borrower interaction. As information asymmetries are critical for financial intermediation at all levels of lending (especially for those lending to the poor), building relationship has been considered an alternative type of lending to diminish this problem. Microfinance institutions (MFI) while using the relationship to lend hold most of the risk of lending. How do they know whom to lend? What are the probabilities of the borrower to pay the loan back on time? What are the characteristics of the borrowers that influence a positive behavior to pay back the loan on time? Using a recent unique data set from a Mexican MFI (SOFIPA) we analyze 122,594 credits given to active entrepreneurial poor women in a joint liability-based group lending model. Our results suggest that social ties and a stronger relationship built between the MFI and the women determine a better repayment performance.

Keywords

Relationship lending Entrepreneurship Microfinance institutions Microcredits 

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Copyright information

© The Author(s) 2020

Authors and Affiliations

  1. 1.Department of Entrepreneurship and InnovationEGADE Business SchoolMexico CityMexico
  2. 2.EGADE Business SchoolMexico CityMexico

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