New CERMi-CEB working paper by SOCENT researchers Anastasia Cozarenco and Ariane Szafarz available on-line

A new CERMi-CEB working paper, "Microcredit in Industrialized Countries: Unexpected Consequences of Regulatory Loan Ceilings", by SOCENT researchers Anastasia Cozarenco and Ariane Szafarz, is available on-line on the SOCENT website.

Abstract: Subsidized microfinance institutions (MFIs) provide affordable credit to small entrepreneurs. Many industrialized countries regulate MFIs. But in a market with accessible small business financing, regulatory loan ceilings can jeopardize the supply of microcredit to the most disadvantaged people. This is because small entrepreneurs in need of above-ceiling credit have the option to combine a ceiling-high microcredit with a supplementary loan from a regular bank. By reducing information asymmetry, this type of co-financing may prompt MFIs to divert credit away from entrepreneurs seeking below-ceiling loans. This study uses hand-collected data from a French MFI to test, and partly confirm, this theory.