Evaluating the Impact of Mass Borrower Bailout in Jordan's Microfinance Landscape

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Microfinance
microcredit
borrower relief
debt forgiveness
credit market intervention
credit rationing
moral hazard
adverse selection
Jordan
emerging markets
Business
Economic Policy
Economics
Finance
Growth and Development
Other Economics
Policy Design, Analysis, and Evaluation
Political Economy
Public Policy
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Abstract

Borrower debt relief stands as a widely utilized, yet deeply contentious economic policy enacted by governments universally. This paper adopts a difference-in-differences design to study the impact of a women-targeted mass borrower relief program enacted by the government of Jordan in 2019 on credit market outcomes of formal microfinance institutions (MFIs). I find that the program led to significant credit rationing and reallocation from women and areas of higher risk to men and areas of lower risk. Post-program levels of MFI portfolio risk remain stable with no evidence supporting the existence of moral hazard among MFIs, suggesting stricter lending practices in response to the relief.

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Shing-Yi Wang
Date of degree
2022-01-01
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