Microfinance institutions get around the problem of moral hazard and high default rates by:
A)lending to groups rather than individuals.
B)lending only to proven borrowers.
C)lending only to large businesses.
D)charging usurious interest rates.

Question

Quizplus · Accepted Answer

Microfinance institutions often lend to groups of individuals who are collectively responsible for each other's loans. This creates a sense of community and peer pressure to ensure that everyone makes timely repayments. This reduces the risk of moral hazard and default rates. Additionally, microfinance institutions typically provide training and support to borrowers to help them develop successful businesses and increase their chances of being able to repay their loans.

Microfinance Institutions Get Around the Problem of Moral Hazard and High