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Do Peer Group Members Outperform Individual Borrowers? A Test of Peer Group Lending Using Canadian Micro-Credit Data

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Author Info
Rafael Gomez
Eric Santor

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Abstract

Microfinance institutions now serve over 10 million poor households in the developing and developed world, and much of their success has been attributed to their innovative use of peer group lending. There is very little empirical evidence, however, to suggest that group lending schemes offer a superior institutional design over lending programs that serve individual borrowers. The authors find empirical evidence that group lending does indeed lower borrower default rates more than conventional individual lending, and that this effect operates through the dual channels of selection into the peer lending program and, once inside the program, greater group borrower effort.

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File URL: http://www.bankofcanada.ca/en/res/wp/2003/wp03-33.pdf
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Paper provided by Bank of Canada in its series Working Papers with number 03-33.

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Length: 58 pages
Date of creation: 2003
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Handle: RePEc:bca:bocawp:03-33

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  2. Barbara Sianesi, 2001. "Propensity score matching," United Kingdom Stata Users' Group Meetings 2001 12, Stata Users Group, revised 23 Aug 2001. [Downloadable!]
  3. Rafael Gomez & Eric Santor, 2001. "Membership has its privileges: the effect of social capital and neighbourhood characteristics on the earnings of microfinance borrowers," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 943-966, November. [Downloadable!] (restricted)
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    Other versions:
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    Other versions:
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  14. Jeffrey A. Smith & Petra E. Todd, 2001. "Reconciling Conflicting Evidence on the Performance of Propensity-Score Matching Methods," American Economic Review, American Economic Association, vol. 91(2), pages 112-118, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hisaki Kono, 2006. "Is Group Lending A Good Enforcement Scheme for Achieving High Repayment Rates? Evidence from Field Experiments in Vietnam," Artefactual Field Experiments 0063, The Field Experiments Website. [Downloadable!]
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