Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2006:14:
The Microfinance Collateralized Debt Obligation: a Modern Robin Hood?

Hans Byström ()

Abstract: The aim of this paper is to highlight a potentially very fruitful link between micro-entrepreneurs and the international capital markets. We discuss the role structured finance and credit derivatives could play in extending finance to micro-entrepreneurs on a much larger scale than today’s mainly non-commercial microfinance industry. The mechanisms of so called collateralized debt obligations (CDOs) are described and extended to the microfinance world. Finally, a hypothetical, but realistic, example of such a microfinance CDO (MiCDO) is used to discuss the implications of securitization and tranching of microcredits.

Keywords: commercial microfinance; structured finance; securitization; collateralized debt obligation; MiCDO; (follow links to similar papers)

JEL-Codes: G15; G21; O16; R51; (follow links to similar papers)

22 pages, June 18, 2006, Revised August 21, 2006

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This paper is published as:
Byström, Hans, (2008), 'The Microfinance Collateralized Debt Obligation: a Modern Robin Hood?', World Development, Vol. 36, pages 2109-2126

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