In this paper we apply the Principal/Agent theory in case of microcredit granted to the Moroccan micro-companies. The practice reveals us that a part of the receipted credits is diverted from its initial objective. Indeed, a situation of information asymmetries linked with adverse selection and...

The role of Annual Percentage Rate (APR) in installment plan selection was investigated. The choice of analyzing APR was motivated by its wide diffusion due to the mandatory disclosure acts. There have been doubts towards consumer understanding of APR. A sample of 299 consumers were given five...

Existing studies are not conclusive in favor of a strong relationship between the financial literacy and the ability to take better borrowing decisions. Results are quite heterogeneous and often point out the relevance of other factors, such as socio-demographic features or practical experience...

We analyze the optimal regulation of a MFI that has private information on the intrinsic quality of its loan portfolio (adverse selection) and where the MFI’s choice of effort to improve this quality cannot be observed by the regulator (moral hazard). In designing optimal contracts the...

This paper examines the impact of a public credit registry on the repayment behavior of borrowers. We implement an experimental credit market in which loan repayment is not third-party enforceable. We compare market outcome with a credit registry to that without a credit registry. This...

This paper examines the power of different contractual mechanisms to influence an originator’s choice of costly effort to screen borrowers when the originator plans to securitise its loans. The analysis focuses on three potential mechanisms: the originator holds a “vertical slice”, or...

This paper models the strategic interaction between a rating agency, a bank and a bank regulator who lacks information about bank asset risk. The regulator can either (1) make bank capital requirements contingent on credit ratings; or (2) set rating-independent capital requirements. Truthful...

The objective of this research is to examine the inter-bank network of clients as a channel for credit risk transmission by groups of banks in Serbia characterized by different levels of credit risk (clusters). Two of the four observed groups of banks have experienced increase in NPLs through...

We demonstrate in this paper using transdisciplinary approach that the same theory of information asymmetry that explains the raison d’être of financial intermediaries also explains why financial exclusion exists. This paper synthesises some elements of theories of finance and economics in...

I develop a dynamic model of bank runs that allows me to study important phenomena such as the role of information externalities and herd behavior of depositors as a source of bank runs. I show that eliminating bank runs completely, even they can be generated by herd behavior of depositors, has...