Rethinking Banking Armendariz – Morduch (Chap. 1) - PowerPoint PPT Presentation

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Rethinking Banking Armendariz – Morduch (Chap. 1)

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  1. Rethinking BankingArmendariz – Morduch (Chap. 1) Week 1 Lecture 2

  2. 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

  3. Credit: An Overview

  4. Demand side

  5. Supply side

  6. Neoclassical theory

  7. Two reasons why this may not happen

  8. Classical example: Irfan Aleem (1990): 78% in Pakistan

  9. Justifying InterventionTwo reasons: 1) Efficiency and 2) Distribution

  10. 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)