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Joint Liability Lending In Microcredit Markets With Adverse Selection: A Survey

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  • Alessandro Fedele

Abstract

This article reviews recent literature on joint liability lending in micro-credit markets characterized by adverse selection. This mode of lending consists of granting individual loans to wealthless borrowers provided that they form groups. If a group does not fully repay its obligations, then the microlender cuts off all members from future credit until the debt is repaid. Joint liability lending is able to extract information through a peer selection mechanism, with the effect of raising both repayment rates and welfare with respect to individual lending.

Suggested Citation

  • Alessandro Fedele, 2006. "Joint Liability Lending In Microcredit Markets With Adverse Selection: A Survey," The IUP Journal of Bank Management, IUP Publications, vol. 0(2), pages 55-63, May.
    • Handle: RePEc:icf:icfjbm:v:5:y:2006:i:2:p:55-63
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    Cited by:

    1. F. Calidoni-Lundberg & A. Fedele, 2006. "Technology replaces culture in microcredit markets: the case of Italian MAGs," Economics Department Working Papers 2006-EP11, Department of Economics, Parma University (Italy).
    2. Abdelhamid, El Bouhadi & Omar, Essardi, 2007. "Micro-microcrédit et asymétries d’information : cas du Maroc [INFORMATION asymmetries and microcredit: The Moroccan case]," MPRA Paper 20080, University Library of Munich, Germany.
    3. Kundu, AMIT & MITRA, SURANJANA, 2009. "Determinants Influencing a Rural Household's Preference to Join Individual Liability or Joint Liability Micro Credit Contract Operated by Primary Aagricultural Credit Society," MPRA Paper 21784, University Library of Munich, Germany, revised 10 Oct 2009.
    4. Federica Calidoni & Alessandro Fedele, 2009. "Profit‐maximizing behaviour replaces social sanctions in urban microcredit markets The case of Italian MAGs1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(2), pages 329-349, April.
    5. F. Calidoni-Lundberg & A. Fedele, 2006. "Technology replaces culture in microcredit markets: the case of Italian MAGs," Economics Department Working Papers 2006-EP11, Department of Economics, Parma University (Italy).

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