Joint Liability and Peer Monitoring under Group Lending
AbstractThis paper studies an incentive rationale for the use of group lending as a method of financing liquidity-constrained entrepreneurs. The joint liability feature associated with group lending lowers the liquidity risk of default but creates a free-riding problem. In the static setting, the free-riding problem dominates the liquidity risk effect under a plausible condition, thus making group lending unattractive. When the projects are repeated infinitely many times, however, the joint liability feature provides the group members with a credible means of exercising peer sanction, which can make the group lending attractive, relative to individual lending.
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 De Gruyter in its journal The B.E. Journal of Theoretical Economics.
Volume (Year): 2 (2002)
Issue (Month): 1 (July)
Contact details of provider:
Web page: http://www.degruyter.com
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Marx, Leslie M. & Squintani, Francesco, 2009.
"Individual accountability in teams,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 72(1), pages 260-273, October.
- Jeon, Doh-Shin & Menicucci, Domenico, 2011.
"When is the optimal lending contract in microfinance state non-contingent?,"
European Economic Review,
Elsevier, vol. 55(5), pages 720-731, June.
- Jeon, Doh-Shin & Menicucci, Domenico, 2010. "When Is the Optimal Lending Contract in Microfinance State Non-Contingent?," IDEI Working Papers 599, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jeon, Doh-Shin & Menicucci, Domenico, 2010. "When Is the Optimal Lending Contract in Microfinance State Non-Contingent?," TSE Working Papers 10-146, Toulouse School of Economics (TSE).
- Francesco Columba & Leonardo Gambacorta & Paolo Emilio Mistrulli, 2009.
"Mutual guarantee institutions and small business finance,"
BIS Working Papers
290, Bank for International Settlements.
- Columba, Francesco & Gambacorta, Leonardo & Mistrulli, Paolo Emilio, 2010. "Mutual guarantee institutions and small business finance," Journal of Financial Stability, Elsevier, vol. 6(1), pages 45-54, April.
- Columba, F. & Gambacorta, L. & Mistrulli, P.E., 2009. "Mutual Guarantee Institutions and Small Business Finance," Discussion Paper 2009-32 S, Tilburg University, Center for Economic Research.
- Francesco Columba & Leonardo Gambacorta & Paolo Emilio Mistrulli, 2009. "Mutual guarantee institutions and small business finance," Temi di discussione (Economic working papers) 735, Bank of Italy, Economic Research and International Relations Area.
- Jonathan Conning, 2005. "Monitoring by Peers or by Delegates? Joint Liability Loans and Moral Hazard," Hunter College Department of Economics Working Papers 407, Hunter College: Department of Economics.
- Ishida, Junichiro, 2009. "Incentives in academics: Collaboration under weak complementarities," Labour Economics, Elsevier, vol. 16(2), pages 215-223, April.
- Simtowe, Franklin & Zeller, Manfred & Phiri, Alexander, 2006. "Determinants of Moral hazard in Microfinance: Empirical Evidence from Joint Liability Lending Schemes in Malawi," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25287, International Association of Agricultural Economists.
- 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.
- Cason, Timothy N. & Gangadharan, Lata & Maitra, Pushkar, 2012. "Moral hazard and peer monitoring in a laboratory microfinance experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 192-209.
- Paal, Beatrix & Wiseman, Thomas, 2011. "Group insurance and lending with endogenous social collateral," Journal of Development Economics, Elsevier, vol. 94(1), pages 30-40, January.
- Simtowe, Franklin & Zeller, Manfred, 2006. "Determinants of Moral Hazard in Microfinance: Empirical Evidence from Joint Liability Lending Programs in Malawi," MPRA Paper 461, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla).
If references are entirely missing, you can add them using this form.