Capacity, Patronage, and Exit from Mutual Credit

Georgy Lukyanov

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arXiv · 2509.03086

Capacity, Patronage, and Exit from Mutual Credit

Georgy Lukyanov

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Abstract

Member-owned lenders pool project returns and rebate surplus as patronage, insuring borrowers but tying membership value to pool composition. We study a capacity-constrained mutual alongside competitive market debt. Market access initially complements the mutual by financing rationed borrowers. Once capacity is broad enough, however, high-return members prefer individual debt to subsidizing the common pool and exit. Their departure frees capacity for low-return members but destroys risk sharing. Market access therefore raises welfare at low capacity and lowers it near full capacity: cream-skimming begins strictly before it becomes harmful. The mechanism survives incomplete pooling.

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Georgy Lukyanov. 2025-09-03. Capacity, Patronage, and Exit from Mutual Credit. https://arxiv.org/abs/2509.03086

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