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Risk behaviour and group formation in microcredit groups in Eritrea

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  • Lensink, Robert
  • Mehrteab, Habteab T.

    (Groningen University)

Abstract

We conducted a survey in 2001 among members and group leaders of borrowers who accessed loans from two microcredit programs in Eritrea. Using the results from this survey, this paper aims to provide new insights into the empirical relevance of the homogeneous matching hypothesis for microcredit groups in Eritrea. Since the methodology to test for homogeneous matching needs estimating risk behaviour, the paper also provides new evidence on risk behaviour of members of microcredit groups in Eritrea. Our main results strongly indicate that groups are formed heterogeneously. Most importantly, we do not find support for the matching frictions hypothesis, in the sense that even if we control for matching frictions, credit groups in Eritrea do not seem to consist of borrowers of the similar risk type.

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File URL: http://irs.ub.rug.nl/ppn/243938128
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Bibliographic Info

Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 03E04.

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Date of creation: 2003
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Handle: RePEc:dgr:rugsom:03e04

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  1. Maitreesh Ghatak & Timothy W. Guinnane, 1998. "The Economics of Lending with Joint Liability: Theory and Practice," Discussion Papers 98-16, University of Copenhagen. Department of Economics.
  2. Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
  3. Armendariz de Aghion, Beatriz, 1999. "On the design of a credit agreement with peer monitoring," Journal of Development Economics, Elsevier, vol. 60(1), pages 79-104, October.
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Cited by:
  1. repec:ebl:ecbull:v:15:y:2005:i:9:p:1-8 is not listed on IDEAS
  2. Dyuti Banerjee & Anupama Sethi, 2008. "Intra-Group Transfers And Group Formation," Development Research Unit Working Paper Series 24/08, Monash University, Department of Economics.
  3. Yan Liu & Guang???Zhen Sun, 2008. "Competition And Access Regulation In The Telecommunications Industry With Multiple Networks," Development Research Unit Working Paper Series 25/08, Monash University, Department of Economics.

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