POLI 3424 Lecture Notes - Lecture 21: Fixed Cost, Savings Account, Switching Barriers
12 Nov 2020
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The poor are borrowing less money because they need less. They are financing small businesses or a small crisis in their life. For the poor and for the banks. If you lend a large amount of money, you are going to recover most of those costs at a relatively low interest rate. Takes a really good investment to cover the principle and the interest rate. They are going to judge you on your reputation. Very few people are willing to change lenders. We get better rates in the us because people shop around (there is competition) Stuck with the money lender that you have. They don"t have the social pressures to pay. The local networks that are needed for enforcement aren"t there. Doesn"t have to be just through banks. Challenges are the same for you and me as they are for the poor, expect we have structures in place that help us with self-control.
