Economics of Microcredit-From current crisis to new possibilities

Mitoko, Jeremiah (2021): Economics of Microcredit-From current crisis to new possibilities.

Abstract

Following the United Nations declaration of 2005 as the International Year of Microcredit, international organizations began to promote a tighter regulatory and supervisory framework for the microcredit industry. In this paper, I review the theoretical basis of this development considering recent empirical findings that microcredit programs tend to have initial success yet demonstrate few significant benefits beyond two years. I utilize an agent-based simulation as an ex-ante policy assessment tool to examine a tighter regulatory strategy. My findings for Kenya, with possible application to other developing countries and regions, suggest that a less rigid regulatory framework is more likely to lead to more sustained positive impacts than this emulation strategy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Microcredit Financial Development Agent-based Models Financial Crises – Causes of Financial Crises – Research Government Policy and Regulation
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; F - International Economics > F6 - Economic Impacts of Globalization > F63 - Economic Development; G - Financial Economics > G0 - General > G01 - Financial Crises; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O23 - Fiscal and Monetary Policy in Development; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

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