Microenterprise Credit: Is There a Need for Subsidy?
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Publisher:Ohio State University. Department of Agricultural, Environmental, and Development Economics
Series/Report no.:Ohio State University. Department of Agricultural Economics and Rural Sociology. ESO (Economics and Sociology Occasional Paper). No. 2229
An empirical analysis of credit constraints is undertaken using an endogenous switching regression model. The empirical results clearly show the potential positive effect of credit expansion for microenterprises. Contrary to conventional credit impact studies, however, the results suggest that micro entrepreneurs are potentially capable of realizing high marginal rates of return, so that there is no justification for subsidized rates of interest for microenterprise credit.