10. Adverse selection: incomplete information problem (before the loan) Don’t know Client’s type Interest rate reflects proba of default Safer clients drop out Need to increase interest rate Providing credit can become impossible
11. Moral hazard: hidden action problem (after loan) Can not observe what client is doing Bad loan usage Strategic unwillingness To repay
25. Gaps in demand and supply Demand: Rs. 450 billion/y 60% in South … to cover all parts of India Less than 2 million Households reached 500 million un-served poor Disbursed: 39 billion Need employment opportunities Need protection against all risks Market constraints Insurance under-delivered Scaling up Increase impact
45. Maximize impact Vulnerability Need for More than credit Differences among customers Need for customized products Understand what programmes work the best and for whom
46. Maximize impact Local Financial Institution: serving all credit constraint- Segments in 2-3 districts Employment scarcity Other constraints Finance other credit constraint segments MFI-sectoral experts Partnerships