The Elasticity of Demand for Microcredit
Vicki L. Bogan
Calum G. Turvey
Cornell University - School of Applied Economics and Management
July 20, 2010
While most theoretical models assume the demand for microcredit is inelastic, the price elasticity of demand for microcredit is exceptionally relevant in designing appropriate microfinance institution (MFI) financial products and policy. Using a unique survey instrument, this paper extracts loan demand schedules and elasticities of MFI borrowers in the Dominican Republic. We find that client demand elasticities are not homogeneous and are correlated with certain borrower characteristics. Overall, results suggest that micro-entrepreneurs, who have already entered the MFI market, have close to unit elastic demand for microcredit.
Number of Pages in PDF File: 33
Keywords: Microcredit, Demand elasticity
JEL Classification: G21, O16working papers series
Date posted: July 21, 2010 ; Last revised: August 31, 2011
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