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A Matter of Experience? Understanding the Decline in Group Lending

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  • Christian Ahlin
  • Matthew Suandi

Abstract

Group lending, often considered a key innovation driving the successful expansion of microcredit across the world, appears to be on the decline. Using MIX data on microfinance institutions (MFIs), we study this time trend, focusing on macroeconomic predictors of group lending and MFI experience. Results suggest that any movement away from group lending is better explained via MFIs gaining experience rather than a secular time trend. We also find that group lending is used more extensively in poorer and low‐growth economies. We argue that these findings can be understood within established views of group lending, and carry important implications for the historical and continuing importance of group lending.

Suggested Citation

  • Christian Ahlin & Matthew Suandi, 2019. "A Matter of Experience? Understanding the Decline in Group Lending," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 81(6), pages 1252-1279, December.
    • Handle: RePEc:bla:obuest:v:81:y:2019:i:6:p:1252-1279
    DOI: 10.1111/obes.12305
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    Cited by:

    1. Franklin Allen & Elena Carletti & Robert Cull & Jun QJ Qian & Lemma Senbet & Patricio Valenzuela, 2021. "Improving Access to Banking: Evidence from Kenya [A matter of experience? Understanding the decline in group lending]," Review of Finance, European Finance Association, vol. 25(2), pages 403-447.
    2. Christian Ahlin, 2020. "Group lending, matching patterns, and the mystery of microcredit: Evidence from Thailand," Quantitative Economics, Econometric Society, vol. 11(2), pages 713-759, May.
    3. Ahlin, Christian & Debrah, Godwin, 2022. "Group lending with covariate risk," Journal of Development Economics, Elsevier, vol. 157(C).
    4. Tchakoute Tchuigoua, Hubert & Soumaré, Issouf & Hessou, Hélyoth T.S., 2020. "Lending and business cycle: Evidence from microfinance institutions," Journal of Business Research, Elsevier, vol. 119(C), pages 1-12.

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