Journal
DEVELOPMENT POLICY REVIEW
Volume 33, Issue 6, Pages 725-757Publisher
WILEY-BLACKWELL
DOI: 10.1111/dpr.12131
Keywords
Microcredit; Demand elasticity
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Microcredit demand is frequently assumed to be inelastic, yet understanding the price elasticity of demand for microcredit is highly relevant in designing appropriate microfinance institution (MFI) financial products and policy. This article extracts loan demand schedules and elasticities of MFI borrowers in the Dominican Republic using a unique survey instrument. We analyse the intensive margin of microcredit demand and find that client demand elasticities are not homogeneous and are correlated with certain borrower characteristics. Overall results suggest that these micro-entrepreneurs, who have already entered the MFI market, have close to unit elastic demand for microcredit. The mean demand elasticity for our sample is -1.0.
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