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Group Lending or Individual Lending? Evidence from a Randomized Field Experiment in Rural Mongolia

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  • Attanasio, O.
  • Augsburg, B.
  • Haas, R. de
  • Fitzsimons, E.
  • Harmgart, H.

    (Tilburg University, Center for Economic Research)

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    Abstract

    Abstract: We present evidence from a randomized field experiment in rural Mongolia on the comparative poverty impact of group versus individual microcredit. We find a positive impact of group loans but not of individual loans on entrepreneurship and food consumption. Moreover, group borrowers are less likely to make informal transfers to families and friends while the opposite holds true for individual borrowers. This suggests that joint liability may deter borrowers from using loans for non-investment purposes with stronger impacts as a result. We find no difference in repayment rates between both types of microcredit.

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    Bibliographic Info

    Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2013-074.

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    Date of creation: 2013
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    Handle: RePEc:dgr:kubcen:2013074

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    Keywords: Microcredit; poverty; randomized field experiment;

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    2. Marcel Fafchamps & David McKenzie & Simon R. Quinn & Christopher Woodruff, 2011. "When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana," NBER Working Papers 17207, National Bureau of Economic Research, Inc.
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    17. Jenny Aker, Rachid Boumnijel, Amanda McClelland, and Niall Tierney, 2011. "Zap It to Me: The Short-Term Impacts of a Mobile Cash Transfer Program - Working Paper 268," Working Papers 268, Center for Global Development.
    18. Wydick, Bruce, 1999. "Can Social Cohesion Be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala," Economic Journal, Royal Economic Society, vol. 109(457), pages 463-75, July.
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    22. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
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