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Banking with sentiments. A model of fiduciary interactions in micro-credit programs

Pelligra, Vittorio (2005) Banking with sentiments. A model of fiduciary interactions in micro-credit programs. Working Paper. CRENoS.

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Official URL: http://www.crenos.it/working/pdf/05-03.pdf

Abstract

The success of many micro-credit initiatives is difficult to account for in the traditional economic framework, where, mainly because of the assumption of self-interested behaviour, credit is rationed and provided only to those able to back it with collaterals. Having analysed different alternative explanations for such a success, the paper introduces the concept of trust responsiveness in the lender-borrower relationship and formalises it in a psychological game-theoretical model aimed at explaining the unusually high rate of repayment experienced in micro-credit programs. Three well-known psychological effects are introduced to discuss the factors that may positively or negatively affect borrowers’ trustworthiness. This model provides important normative implications for institutional design.

Item Type:Technical Report / Working Paper / Project Report (Working Paper)
Publisher:CRENoS
Date:2005
Institution:Universita' degli Studi di Cagliari
Divisions:Centri > CRENoS Centro Ricerche Economiche Nord Sud
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/06 Economia applicata
Uncontrolled Keywords:Microfinance, Trust responsiveness, Psychological Game Theory
ID Code:251
Deposited On:10 Nov 2008 11:17

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