ECON 314 Lecture Notes - Lecture 21: Informal Sector, Microcredit, Peer Pressure
27 Mar 2018
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Document Summary
Chapter 15 finance and fiscal policy for development: most important aspect of financial markets: markets not cleared by prices, banks lend on basis of your ability to repay, banks in financial system. Credit worthiness by evaluating business plans, by collateral proffered or implicit, and by political decisions. In context of countries like sk (nationalizing banks) and japan (guidance and support for banks) Banks is not supply / demand model (it does not correspond to that model) Very costly for banker to make small loan it"s a lot easier for huge loans. Credit allocation requires detailed information (smaller loan usually less information); it is cheaper to lend to large borrowers rather than small borrowers. Banks are repositories of a lot of valuable information on potential creditors: banks get & accumulate a lot of information; established flow of information between banks and their clients. If a bank collapses, all information of clients goes with it.
