Key Factors of Joint-Liability Loan Contracts: An Empirical Analysis
AbstractThis paper provides an empirical analysis of joint-liability micro-lending contracts. Using our data set, we examine the efficacy of various incentives set by this contract such as joint-liability between groups of borrowers or group access to future and to larger loans. As proposed by theory, we find that joint liability induces a group formation of low risk borrowers. After the loan disbursement, the incentive system leads to peer monitoring, peer support and peer pressure between the borrowers, thus helping the lending institution to address the moral hazard and enforcement problem. This paper also demonstrates that the mechanism realizes repayment rates of nearly 100% if the loan officers fulfill their complementary duties in the screening and enforcement process. Finally, we make clear that dynamic incentives, in contrast to theory, have to be restricted if the two long-term problems of the joint-liability approach, i.e. its mismatching problem and the domino effect, are to be tackled notably. Copyright 2005 Blackwell Publishing Ltd..
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Kyklos.
Volume (Year): 58 (2005)
Issue (Month): 2 (04)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0023-5962
Other versions of this item:
- Kritikos, Alexander S. & Vigenina, Denitsa, 2005. "Key Factors of Joint-Liability Loan Contracts: An Empirical Analysis," Discussion Papers 231, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
- O22 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Van Tassel, Eric, 1999. "Group lending under asymmetric information," Journal of Development Economics, Elsevier, vol. 60(1), pages 3-25, October.
- Armendariz de Aghion, Beatriz, 1999. "On the design of a credit agreement with peer monitoring," Journal of Development Economics, Elsevier, vol. 60(1), pages 79-104, October.
- Thomas Dufhues & Gertrud Buchenrieder & Hoang Dinh Quoc, 2012. "Social capital and loan repayment performance in Northern Vietnam," Agricultural Economics, International Association of Agricultural Economists, vol. 43(3), pages 277-292, 05.
- Kurosaki, Takashi & Khan, Hidayat Ullah, 2011. "Vulnerability of Microfinance to Strategic Default and Covariate Shocks:Evidence from Pakistan," PRIMCED Discussion Paper Series 10, Institute of Economic Research, Hitotsubashi University.
- Kritikos, Alexander S. & Bolle, Friedel & Tan, Jonathan H.W., 2007.
"The economics of solidarity: A conceptual framework,"
Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics),
Elsevier, vol. 36(1), pages 73-89, February.
- Kritikos, Alexander S. & Bolle, Friedel & Tan, Jonathan H. W., 2005. "The Economics of Solidarity: A Conceptual Framework," Discussion Papers 233, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
- Dyuti Banerjee & Anupama Sethi, 2008. "Intra-Group Transfers And Group Formation," Monash Economics Working Papers 24/08, Monash University, Department of Economics.
- Jeffrey Carpenter & Tyler Williams, 2010. "Moral hazard, peer monitoring, and microcredit: field experimental evidence from Paraguay," Working Papers 10-6, Federal Reserve Bank of Boston.
- Yan Liu & Guang???Zhen Sun, 2008. "Competition And Access Regulation In The Telecommunications Industry With Multiple Networks," Monash Economics Working Papers 25/08, Monash University, Department of Economics.
- Vittoria Cerasi & Lucia Dalla Pellegrina, 2009. "Solidarity Behind Microfinance," Working Papers 20091101, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.