Publication:
Debt Relief for Households in Developing Economies

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dc.contributor.authorIndarte, Sasha
dc.contributor.authorKanz, Martin
dc.date.accessioned2024-06-26T18:53:45Z
dc.date.available2024-06-26T18:53:45Z
dc.date.issued2024-06-26
dc.description.abstractHouseholds in developing economies have greater access to formal credit today than at any point in history, owing to the global expansion of microfinance and recent innovations in consumer finance, such as digital lending. Although this has improved the ability to smooth consumption and invest in productive activities, it has also raised concerns about over-indebtedness. Against this background, this paper reviews and extends the literature on debt relief for households in developing countries. It begins by laying out a simple stylized model that illustrates the costs and benefits of debt relief. The model is used to guide the review of the evidence on various relief policies, such as debt forbearance, debt forgiveness, and personal bankruptcy. The paper additionally presents survey evidence from a population of microfinance and bank borrowers with recent exposure to debt relief. The results highlight that an important downside of discretionary debt relief policies, which are common in developing countries, is their potential to affect borrower expectations and create moral hazard. The development of legal bankruptcy institutions that offer a rules-based avenue to discharge unsustainable debts is a promising path to alleviate the credit market inefficiencies that have often accompanied debt relief initiatives in developing economies.en
dc.identifierhttp://documents.worldbank.org/curated/en/099058006252414516/IDU1c47ce8a818d70144721b4f516ec7f09c7b46
dc.identifier.doi10.1596/1813-9450-10819
dc.identifier.urihttps://hdl.handle.net/10986/41782
dc.languageEnglish
dc.language.isoen_US
dc.publisherWashington, DC: World Bank
dc.relation.ispartofseriesPolicy Research Working Paper; 10819
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectDEBT RELIEF
dc.subjectDEBT FORBEARANCE
dc.subjectPERSONAL BANKRUPTCY
dc.subjectMORAL HAZARD
dc.subjectDECENT WORK AND ECONOMIC GROWTH
dc.subjectSDG 8
dc.titleDebt Relief for Households in Developing Economiesen
dc.typeWorking Paper
dspace.entity.typePublication
okr.date.disclosure2024-06-26
okr.date.lastmodified2024-06-24T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099058006252414516/IDU1c47ce8a818d70144721b4f516ec7f09c7b46
okr.guid099058006252414516
okr.identifier.docmidIDU-c47ce8a8-8d70-4472-b4f5-6ec7f09c7b46
okr.identifier.doi10.1596/1813-9450-10819
okr.identifier.doihttps://doi.org/10.1596/1813-9450-10819
okr.identifier.externaldocumentum34348489
okr.identifier.internaldocumentum34348489
okr.identifier.reportWPS10819
okr.import.id4599
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099058006252414516/pdf/IDU1c47ce8a818d70144721b4f516ec7f09c7b46.pdfen
okr.region.geographicalWorld
okr.topicMacroeconomics and Economic Growth::Economic Adjustment and Lending
okr.topicFinance and Financial Sector Development::Bankruptcy and Resolution of Financial Distress
okr.topicFinance and Financial Sector Development::Debt Relief and HIPC
okr.topicMacroeconomics and Economic Growth::Economic Growth
okr.topicFinance and Financial Sector Development::Microfinance
okr.unitDECRG: Finance & Priv Sec Devt (DECFP)
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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