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Determinants of Repayment in Microcredit: Evidence from Programs in the United States

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  • Nitin Bhatt
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    Abstract

    Many microcredit programs have been created in the United States in the past decade that replicate design features of their counterparts in the third world. Yet few systematic studies have been carried out to examine what determines these programs' loan repayment performance. We attempt to fill this gap by studying the determinants of loan repayment for four of the oldest group-based microcredit programs in the US. Our findings suggest that these programs are faced with a set of social and institutional environments that are both similar to and different from those faced by their third-world counterparts. On the one hand we find that higher levels of education and proximity to the lending agency increase the chances of loan repayment. Low transaction costs for accessing loans and high borrower-costs in the event of default also enhance loan repayment performance. On the other hand key variables such as gender and homogeneity of borrowers are not significantly related to loan repayment. We conclude by examining the implications of these findings for program design in the US. Copyright Joint Editors and Blackwell Publishers Ltd 2002.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal International Journal of Urban and Regional Research.

    Volume (Year): 26 (2002)
    Issue (Month): 2 (06)
    Pages: 360-376

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    Handle: RePEc:bla:ijurrs:v:26:y:2002:i:2:p:360-376

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    Cited by:
    1. Kangogo, Daniel & Lagat, Job & Ithinji, Gicuru, 2013. "The Influence of Social Capital Dimensions on Household Participation in Micro-Credit Groups and Loan Repayment Performance in Uasin Gishu County, Kenya," MPRA Paper 48624, University Library of Munich, Germany.
    2. Boehe, Dirk Michael & Barin Cruz, Luciano, 2013. "Gender and Microfinance Performance: Why Does the Institutional Context Matter?," World Development, Elsevier, vol. 47(C), pages 121-135.
    3. Timothy N. Cason & Lata Gangadharan & Pushkar Maitra, 2008. "Moral Hazard and Peer Monitoring in a Laboratory Microfinance Experiment," Purdue University Economics Working Papers 1208, Purdue University, Department of Economics.
    4. D'Espallier, Bert & Guérin, Isabelle & Mersland, Roy, 2011. "Women and Repayment in Microfinance: A Global Analysis," World Development, Elsevier, vol. 39(5), pages 758-772, May.
    5. Sofia Pereira & Paulo Mourao, 2012. "Why does the microcredit borrowing rate differ across countries? A cross-country study," International Journal of Social Economics, Emerald Group Publishing, vol. 39(8), pages 536-550, July.
    6. James C. Brau & Gary M. Woller, 2004. "Microfinance: A Comprehensive Review of the Existing Literature," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 9(1), pages 1-28, Spring.

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