TY  - SER
AU  - Bourls̈, Renaud
TI  - State intervention and the microcredit market
PY  - 0000///
KW  - Microfinance Institutions
KW  - Business Development Services
KW  - Loan Guarantee
KW  - Microcredit
N2  - We analyze in this paper how various forms of state intervention can impact microfinance institutions' lending behavior. Using a simple model where entrepreneurs receive individual uncollateralized loans, we show that, not surprisingly, state intervention through the loan guarantee increases the number of entrepreneurs receiving a loan. However, after modeling business development services (BDS) provided by the microfinance institution, we show that the loan guarantee can have a counterproductive effect by reducing  the number of entrepreneurs benefiting from such services. We therefore analyze an alternative policy: BDS subsidization. We show that if BDS are efficient enough and are targeted toward less performing borrowers, then-for fixed government expenditures-such subsidies do better in terms of financial inclusion than the loan guarantee. Moreover, we argue that-under similar conditions-BDS subsidization alone does better in terms of financial inclusion than a mix of policies
ER  -