Capacity, Patronage, and Exit from Mutual Credit

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.