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Does the Group Leader Affect Repayment Performance Differently?

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  • Moh'd Al-Azzam
  • Maria Heracleous
  • Sudipta Sarangi

Abstract

Theoretical models of group lending assume that all group members are identical in terms of their effect on repayment performance. In practice, however, this may not be true. We use a unique data set obtained from a survey of 160 borrowing groups in Jordan to investigate the impact of joint liability, screening and monitoring activities, and social ties of the group leader and other group members on repayment performance as measured by the intensity of default using a negative binomial II model. Our results suggest that the joint liability and screening activities of the leader are more strongly related to repayment performance than the same variables for the rest of the group members. Social ties of all members have a significant effect on repayment, while monitoring activities have no effect.

Suggested Citation

  • Moh'd Al-Azzam & Maria Heracleous & Sudipta Sarangi, 2013. "Does the Group Leader Affect Repayment Performance Differently?," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 502-522, October.
    • Handle: RePEc:wly:soecon:v:80:y:2013:i:2:p:502-522
    DOI: 10.4284/0038-4038-2011.098
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