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Does the group leader matter? The impact of monitoring activities and social ties of group leaders on the repayment performance of groupbased lending Eritrea

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  • Hermes, Niels
  • Lensink, Robert
  • Mehrteab, Habteab T.

    (Groningen University)

Abstract

This paper analyzes whether the effects of monitoring and social ties of the group leader and other group members on repayment performance of groups differ, using data from an extensive questionnaire held in Eritrea among participants of 102 groups. We hypothesize that the monitoring activities and social ties of the group leader have a stronger positive impact on the repayment performance of groups. The results show that social ties of the group leader do have a positive effect on repayment performance of groups, whereas this is not true for social ties of other group members. We do not find evidence for the hypothesis that monitoring activities of the group leader have a stronger positive impact on group repayment performance. All variables measuring monitoring activities, either of the group leader or the other group members, are found to be statistically insignificant.

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File URL: http://irs.ub.rug.nl/ppn/288213971
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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 05E05.

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Date of creation: 2005
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Handle: RePEc:dgr:rugsom:05e05

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  1. Karlan, Dean S., 2007. "Social Connections and Group Banking," CEPR Discussion Papers 6194, C.E.P.R. Discussion Papers.
  2. 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.
  3. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
  4. Ghatak, M. & Guinnane, T.W., 1998. "The Economics of Lending with Joint Liability: Theory and Practice," Papers 791, Yale - Economic Growth Center.
  5. repec:cup:cbooks:9780521694681 is not listed on IDEAS
  6. Lapenu, Cécile & Zeller, Manfred, 2001. "Distribution, growth, and performance of microfinance institutions in Africa, Asia, and Latin America," FCND briefs 114, International Food Policy Research Institute (IFPRI).
  7. Sharma, Manohar & Zeller, Manfred, 1997. "Repayment performance in group-based credit programs in Bangladesh: An empirical analysis," World Development, Elsevier, vol. 25(10), pages 1731-1742, October.
  8. Paxton, Julia & Graham, Douglas & Thraen, Cameron, 2000. "Modeling Group Loan Repayment Behavior: New Insights from Burkina Faso," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 639-55, April.
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Cited by:
  1. Remco Eijkel & Niels Hermes & Robert Lensink, 2011. "Group lending and the role of the group leader," Small Business Economics, Springer, vol. 36(3), pages 299-321, April.

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