Regulate Microcredit to Protect Borrowers

22 Pages Posted: 22 Sep 2009

See all articles by Aneel G. Karnani

Aneel G. Karnani

University of Michigan, Stephen M. Ross School of Business

Date Written: September 1, 2009

Abstract

Private for-profit companies are playing an ever-larger role in the microcredit industry. The volatile combination of profit seeking companies, minimal competition, and vulnerable, ill-informed, ill-educated borrowers has opened up dangerous potential for exploiting the poor. Expecting microcredit organizations to exercise self-restraint and self-regulation is naively optimistic and will not work. Regulation is needed to protect the microcredit clients in three areas: transparency, interest rate ceiling, and loan recovery practices.

Keywords: Microcredit, regulation, transparency, interest rate ceiling

JEL Classification: G28, O10, M10, I30

Suggested Citation

Karnani, Aneel G., Regulate Microcredit to Protect Borrowers (September 1, 2009). Ross School of Business Paper No. 1133. Available at SSRN: https://ssrn.com/abstract=1476957 or http://dx.doi.org/10.2139/ssrn.1476957

Aneel G. Karnani (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

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