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EnglishCreditworthiness and trustworthiness are almost synonyms because, under asymmetric information, the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness/trustworthiness nexus in an investment game experiment on a sample of participants/non-participants in a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. The first- and second-order beliefs of trustees are also consistent with this picture. Our findings then show that MF participants appear more trustworthy and this may help microfinance to work. A related consequence is that, if (and only if) borrower's trustworthiness is not public information, the mere loan provision acts as a reputation enhancing signal increasing the borrower's attractiveness as a business partner. In such case we have a channel through which a private financial intermediary contributes to the provision of a public good like information, thereby reducing the adverse consequences of market failures on the creation of economic value.
| Titolo: | Enhancing capabilities through credit access: Creditworthiness as a signal of trustworthiness under asymmetric information |
| Autori Riconosciuti: | |
| Autori: | L. Becchetti; P. Conzo |
| Data di pubblicazione: | 2011 |
| Abstract: | Creditworthiness and trustworthiness are almost synonyms because, under asymmetric information, the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness/trustworthiness nexus in an investment game experiment on a sample of participants/non-participants in a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. The first- and second-order beliefs of trustees are also consistent with this picture. Our findings then show that MF participants appear more trustworthy and this may help microfinance to work. A related consequence is that, if (and only if) borrower's trustworthiness is not public information, the mere loan provision acts as a reputation enhancing signal increasing the borrower's attractiveness as a business partner. In such case we have a channel through which a private financial intermediary contributes to the provision of a public good like information, thereby reducing the adverse consequences of market failures on the creation of economic value. |
| Volume: | 95 |
| Fascicolo: | 3-4 |
| Pagina iniziale: | 265 |
| Pagina finale: | 278 |
| Digital Object Identifier (DOI): | 10.1016/j.jpubeco.2010.11.022 |
| URL: | http://www.sciencedirect.com/science/article/pii/S0047272710001829 |
| Parole Chiave: | Field experiment; Microfinance; Investment game; Trust; Trustworthiness |
| Rivista: | JOURNAL OF PUBLIC ECONOMICS |
| Appare nelle tipologie: | 03A-Articolo su Rivista |
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http://hdl.handle.net/2318/120142
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