The market inefficiency that is being exploited by Grameen Bank. Concept Introduction: Market Inefficiency: It is a situation in which there is a lack of information either to the buyer or to the seller. In case of loanable fund market, inefficiency generally means that the market price is not indicating the demand and supply information correctly. The borrower has a limit in taking loans from the bank because the bank has certain criteria for providing loans. On the other hand, banks lack information about the credibility of borrower. Grameen Bank: It is a bank setup with the main function to provide loans to the poor people without any legal obligation and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Question

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Answer 1

Question

Chapter 25, Problem 1BCQ

To determine

The market inefficiency that is being exploited by Grameen Bank.

Concept Introduction:

Market Inefficiency: It is a situation in which there is a lack of information either to the buyer or to the seller. In case of loanable fund market, inefficiency generally means that the market price is not indicating the demand and supply information correctly. The borrower has a limit in taking loans from the bank because the bank has certain criteria for providing loans. On the other hand, banks lack information about the credibility of borrower.

Grameen Bank: It is a bank setup with the main function to provide loans to the poor people without any legal obligation and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Explanation of Solution

Inefficiency exploited by Grameen Bank:

There is much inefficiency that Grameen Bank has exploited. Some of them are:

It ensures that the loans taken by the group member are repaid without any legal obligations and credit history of the person.
It also takes financial responsibility of the person who borrows from such a bank and gets into some difficult situation.
If all the members repay the loan at the right time, then they are offered a large amount of loan.
It provides loans not on the basis of current price but the amount of the repaid loan by its member.

Source of inefficiency:

The major source of inefficiency in such a market is the lack of communication between borrowers and lenders.
It is because the needs of borrowers are not fulfilled by the bank due to borrowing constraints like collateral assets and credit history.

Conclusion:

Thus, communication between borrowers and lenders is very important in loanable funds market.

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Answer 2

Question

Chapter 25, Problem 1BCQ

To determine

The market inefficiency that is being exploited by Grameen Bank.

Concept Introduction:

Market Inefficiency: It is a situation in which there is a lack of information either to the buyer or to the seller. In case of loanable fund market, inefficiency generally means that the market price is not indicating the demand and supply information correctly. The borrower has a limit in taking loans from the bank because the bank has certain criteria for providing loans. On the other hand, banks lack information about the credibility of borrower.

Grameen Bank: It is a bank setup with the main function to provide loans to the poor people without any legal obligation and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Explanation of Solution

Inefficiency exploited by Grameen Bank:

There is much inefficiency that Grameen Bank has exploited. Some of them are:

It ensures that the loans taken by the group member are repaid without any legal obligations and credit history of the person.
It also takes financial responsibility of the person who borrows from such a bank and gets into some difficult situation.
If all the members repay the loan at the right time, then they are offered a large amount of loan.
It provides loans not on the basis of current price but the amount of the repaid loan by its member.

Source of inefficiency:

The major source of inefficiency in such a market is the lack of communication between borrowers and lenders.
It is because the needs of borrowers are not fulfilled by the bank due to borrowing constraints like collateral assets and credit history.

Conclusion:

Thus, communication between borrowers and lenders is very important in loanable funds market.

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Answer 3

Question

Chapter 25, Problem 1BCQ

To determine

The market inefficiency that is being exploited by Grameen Bank.

Concept Introduction:

Market Inefficiency: It is a situation in which there is a lack of information either to the buyer or to the seller. In case of loanable fund market, inefficiency generally means that the market price is not indicating the demand and supply information correctly. The borrower has a limit in taking loans from the bank because the bank has certain criteria for providing loans. On the other hand, banks lack information about the credibility of borrower.

Grameen Bank: It is a bank setup with the main function to provide loans to the poor people without any legal obligation and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Explanation of Solution

Inefficiency exploited by Grameen Bank:

There is much inefficiency that Grameen Bank has exploited. Some of them are:

It ensures that the loans taken by the group member are repaid without any legal obligations and credit history of the person.
It also takes financial responsibility of the person who borrows from such a bank and gets into some difficult situation.
If all the members repay the loan at the right time, then they are offered a large amount of loan.
It provides loans not on the basis of current price but the amount of the repaid loan by its member.

Source of inefficiency:

The major source of inefficiency in such a market is the lack of communication between borrowers and lenders.
It is because the needs of borrowers are not fulfilled by the bank due to borrowing constraints like collateral assets and credit history.

Conclusion:

Thus, communication between borrowers and lenders is very important in loanable funds market.

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Answer 4

Question

Chapter 25, Problem 1BCQ

To determine

The market inefficiency that is being exploited by Grameen Bank.

Concept Introduction:

Market Inefficiency: It is a situation in which there is a lack of information either to the buyer or to the seller. In case of loanable fund market, inefficiency generally means that the market price is not indicating the demand and supply information correctly. The borrower has a limit in taking loans from the bank because the bank has certain criteria for providing loans. On the other hand, banks lack information about the credibility of borrower.

Grameen Bank: It is a bank setup with the main function to provide loans to the poor people without any legal obligation and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Explanation of Solution

Inefficiency exploited by Grameen Bank:

There is much inefficiency that Grameen Bank has exploited. Some of them are:

It ensures that the loans taken by the group member are repaid without any legal obligations and credit history of the person.
It also takes financial responsibility of the person who borrows from such a bank and gets into some difficult situation.
If all the members repay the loan at the right time, then they are offered a large amount of loan.
It provides loans not on the basis of current price but the amount of the repaid loan by its member.

Source of inefficiency:

The major source of inefficiency in such a market is the lack of communication between borrowers and lenders.
It is because the needs of borrowers are not fulfilled by the bank due to borrowing constraints like collateral assets and credit history.

Conclusion:

Thus, communication between borrowers and lenders is very important in loanable funds market.

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Answer 5

Chapter 25, Problem 1BCQ

To determine

The market inefficiency that is being exploited by Grameen Bank.

Concept Introduction:

Market Inefficiency: It is a situation in which there is a lack of information either to the buyer or to the seller. In case of loanable fund market, inefficiency generally means that the market price is not indicating the demand and supply information correctly. The borrower has a limit in taking loans from the bank because the bank has certain criteria for providing loans. On the other hand, banks lack information about the credibility of borrower.

Grameen Bank: It is a bank setup with the main function to provide loans to the poor people without any legal obligation and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Explanation of Solution

Inefficiency exploited by Grameen Bank:

There is much inefficiency that Grameen Bank has exploited. Some of them are:

It ensures that the loans taken by the group member are repaid without any legal obligations and credit history of the person.
It also takes financial responsibility of the person who borrows from such a bank and gets into some difficult situation.
If all the members repay the loan at the right time, then they are offered a large amount of loan.
It provides loans not on the basis of current price but the amount of the repaid loan by its member.

Source of inefficiency:

The major source of inefficiency in such a market is the lack of communication between borrowers and lenders.
It is because the needs of borrowers are not fulfilled by the bank due to borrowing constraints like collateral assets and credit history.

Conclusion:

Thus, communication between borrowers and lenders is very important in loanable funds market.

Answer 6

Chapter 25, Problem 1BCQ

To determine

The market inefficiency that is being exploited by Grameen Bank.

Concept Introduction:

Market Inefficiency: It is a situation in which there is a lack of information either to the buyer or to the seller. In case of loanable fund market, inefficiency generally means that the market price is not indicating the demand and supply information correctly. The borrower has a limit in taking loans from the bank because the bank has certain criteria for providing loans. On the other hand, banks lack information about the credibility of borrower.

Grameen Bank: It is a bank setup with the main function to provide loans to the poor people without any legal obligation and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Expert Solution & Answer

Explanation of Solution

Inefficiency exploited by Grameen Bank:

There is much inefficiency that Grameen Bank has exploited. Some of them are:

It ensures that the loans taken by the group member are repaid without any legal obligations and credit history of the person.
It also takes financial responsibility of the person who borrows from such a bank and gets into some difficult situation.
If all the members repay the loan at the right time, then they are offered a large amount of loan.
It provides loans not on the basis of current price but the amount of the repaid loan by its member.

Source of inefficiency:

The major source of inefficiency in such a market is the lack of communication between borrowers and lenders.
It is because the needs of borrowers are not fulfilled by the bank due to borrowing constraints like collateral assets and credit history.

Conclusion:

Thus, communication between borrowers and lenders is very important in loanable funds market.

Answer 7

Chapter 25, Problem 1BCQ

To determine

The market inefficiency that is being exploited by Grameen Bank.

Concept Introduction:

Market Inefficiency: It is a situation in which there is a lack of information either to the buyer or to the seller. In case of loanable fund market, inefficiency generally means that the market price is not indicating the demand and supply information correctly. The borrower has a limit in taking loans from the bank because the bank has certain criteria for providing loans. On the other hand, banks lack information about the credibility of borrower.

Grameen Bank: It is a bank setup with the main function to provide loans to the poor people without any legal obligation and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Answer 8

Expert Solution & Answer

Explanation of Solution

Inefficiency exploited by Grameen Bank:

There is much inefficiency that Grameen Bank has exploited. Some of them are:

It ensures that the loans taken by the group member are repaid without any legal obligations and credit history of the person.
It also takes financial responsibility of the person who borrows from such a bank and gets into some difficult situation.
If all the members repay the loan at the right time, then they are offered a large amount of loan.
It provides loans not on the basis of current price but the amount of the repaid loan by its member.

Source of inefficiency:

The major source of inefficiency in such a market is the lack of communication between borrowers and lenders.
It is because the needs of borrowers are not fulfilled by the bank due to borrowing constraints like collateral assets and credit history.

Conclusion:

Thus, communication between borrowers and lenders is very important in loanable funds market.