The price of deposit liquidity: banks versus microfinance institutions |
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| Authors: | Carolina Laureti Ariane Szafarz |
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| Institution: | 1. Université Libre de Bruxelles (ULB), Université de Mons (UMONS) and CERMi, 1050 Brussels, Belgium;2. Université Libre de Bruxelles (ULB), Solvay Brussels School of Economics and Management, Centre Emile Bernheim and CERMi, 1050 Brussels, Belgium |
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| Abstract: | Using data from Bangladesh, this article finds that the liquidity premium – the difference between the interest paid on illiquid and liquid savings accounts – is higher in commercial banks than in microfinance institutions. One possible interpretation lies in the higher prevalence of time-inconsistency among the poor. The observed difference in liquidity premia could be due to poor time-inconsistent agents willing to forgo interest on illiquid savings accounts in order to discipline their future selves. |
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| Keywords: | Liquidity premium present-bias banks microfinance Bangladesh |
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