Rethinking Banking Armendariz – Morduch (Chap. 1) Week 1 Lecture 2.
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Transcript of Rethinking Banking Armendariz – Morduch (Chap. 1) Week 1 Lecture 2.
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Rethinking BankingArmendariz – Morduch (Chap. 1)
Week 1Lecture 2
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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
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Credit: An Overview
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Demand side
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Supply side
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Neoclassical theory
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Two reasons why this may not happen
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Classical example:
Irfan Aleem (1990): 78% in Pakistan
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Justifying InterventionTwo reasons: 1) Efficiency and 2) Distribution
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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)