Spring Newsletter - Professor Suresh Sundaresan's Research in Microfinance
Suresh Sundaresan, the Chase Manhattan Bank Foundation Professor of Financial Institutions, conducts research in concert with the Centre for Microfinance Research, which is housed within the Institute for Financial Management and Research, based in Chennai, India. Topics being explored include decreasing returns to scale, and innovative forms of microinsurance and the impact of private-sector insurance in India. These projects have been identified in collaboration with ICICI Bank, the largest private bank in India.
Sundaresan is currently analyzing the Microfinance Information eXchange, Inc. (MIX) database on microfinance institutions to characterize the quality of the data set and the possible risk-return information that can be gleaned from it.
In addition, he is working on a theoretical investigation of the role of monitoring in microloans in the context of a model in which borrowers are formed into a group through assortative matching and face the threat of exclusion from credit markets if they default. Since monitoring expenses appear to constitute a big part of the interest rates charged on microloans, it is important to establish their incremental role beyond what assortative matching and the threat of exclusion from credit markets accomplishes in mitigating default. This project also explores the possible endogenous credit rationing that may arise from high rates of interest for microloans.