Joint-liability borrowing decisions under risk: Empirical evidence from rural microfinance in Ethiopia
AbstractThis paper investigates borrowing decisions of rural households from a microfinance in Tigray, Ethiopia using household panel data on 5 years and a dynamic panel probit model. The theoretical model takes two types of risk involved in joint-liability lending explicitly into account: risk of partner failure and the risk of losing future access to credit. Empirical results show that these risks are important in explaining borrowing decisions. Another finding is that the probability of repeat-borrowing is higher than the probability of new participation, with possible implications that perceived joint-liability threats deter participation and easing stringent punishments might help poor households’ access to credit.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 44202.
Date of creation: 2008
Date of revision:
Microfinance; risk; dynamic panel probit; Financial Economics;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
- NEP-DEV-2008-11-25 (Development)
- NEP-MFD-2008-11-25 (Microfinance)
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