Rethinking BankingArmendariz – Morduch (Chap. 1)
Week 1Lecture 2
Structure of this class• Credit: An Overview
• Demand side
• Supply side
• Credit Constraints Through the Lens Of Neoclassical Theory
• Justifying Intervention
• Interventions via Development Banks
• Conclusion: The Microfinance Way of Looking at Interventions
Credit: An Overview
Demand side
Supply side
Neoclassical theory
Two reasons why this may not happen
Classical example:
Irfan Aleem (1990): 78% in Pakistan
Justifying InterventionTwo reasons: 1) Efficiency and 2) Distribution
Justifying Interventions In Microfinance
Against a background where interventions in credit markets could not be justified neither on efficiency nor on re-distributive grounds
Microfinance:
GLJR lower “agency costs” affordable interest rates subsidies to disseminate the GLJR
Infant industry argument
Technical assistance for lowering “transaction costs”
Increased competition via “smart subsidies” Next class: A-M (Chapter
2)