Abstract
Recent academic research suggests a positive connection between the quality of service provided by microfinance institutions and the propensity of borrowers to repay their loans. Good customer service improves repayment behaviour, thereby increasing the likelihood of greater financial inclusion. However, good customer service also tends to increase the lender’s costs. In many cases, the regulation of microfinance focuses on the price of credit, without attending to the way in which credit is provided to the borrower. Where there is a cap on the cost of credit, it also reduces the lender’s ability to absorb these additional costs through increased prices. Consequently, lenders are forced to reduce resources allocated to customer service to comply with regulation. Bad regulation—which is focused on the price of the loan—tends to embed financial exclusion more deeply in the financial system; better regulation would attend to the quality of customer service.
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Hannam, M. (2019). Good Customer Service Versus Bad Regulation. In: O'Connor, M., Silva Afonso, J. (eds) Emerging Challenges and Innovations in Microfinance and Financial Inclusion . Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-05261-4_7
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DOI: https://doi.org/10.1007/978-3-030-05261-4_7
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