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Journal Articles Annals of Economics and Statistics Year : 2022

Business Training with a Better-Informed Lender: Theory and Evidence from Microcredit in France

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Abstract

In the microfinance sector, experienced lenders enjoy an information advantage over first-time entrepreneurs. Our study proposes an analysis of the business training provided on a par with microloans and its potential effect on borrowers’behavior. First, we present a simple theoretical mechanism showing that an information advantage concerning borrower risk can lead to a non-monotonic relationship between risk and business training provision. Second, using a hand-collected data set of loan applications to a French MFI, we empirically examine the relationship between business training provision and borrower risk, controlling for selection bias and endogeneity. The collected evidence supports the existence of a non-monotonic relationship and shows that business training significantly increases the survival time of loans. Our results are robust to alternative econometric models.
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Dates and versions

halshs-03934370 , version 1 (24-01-2023)

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Renaud Bourlès, Anastasia Cozarenco, Dominique Henriet, Xavier Joutard. Business Training with a Better-Informed Lender: Theory and Evidence from Microcredit in France. Annals of Economics and Statistics, 2022, 148, pp.65-108. ⟨10.2307/48706310⟩. ⟨halshs-03934370⟩
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