Do microfinance lenders easily reach an optimal welfare?

Sandra, Kendo (2016): Do microfinance lenders easily reach an optimal welfare?

Abstract

Market segmentation characterized by price heterogeneity appears as a failure of classical view of market equilibrium. We suppose that an existence of specific asset pricing determines the wealth level of lenders. In microfinance, we look at the linkages between the welfare of lenders and market segmentation degree. For that, we used a maximization program where a lender utility function is defined. One of the results is that high number of lenders determines their portfolio diversification capacity. In a context of price inelasticity and price discrimination of financial demand for microfinance products, the microfinance market appears as highly segmented but not highly efficient if we consider lenders’ returns. Moreover, an increase of average yield and average amount of initial loans positively improve the utility level of lenders. So, the improvement of microfinance lenders welfare is probable, but highly constrained by the behavior of some important financial factors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Market segmentation, microfinance, lender utility function, asset pricing and lender welfare
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M20 - General

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