Group Size and Social Ties in Microfinance Institutions
AbstractMicrofinance programmes provide poor people with small loans given to jointly liable self-selected groups. Follow-up loans provide incentives to repay. In an experiment we investigate the influence of those features on strategic default. Each group member invests in an individual risky project, whose outcome is known only to the individual investor. Subjects decide, whether to contribute to group repayment or not. Only those with successful projects can contribute. The experiment ends if too few repay. We investigate group size and social ties effects. We observe high repayments rates, which are robust across treatment. Group lending outperforms individual lending. Self-selected groups show a high but less stable willingness to contribute.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 1.
Date of creation: 04 Jun 2002
Date of revision:
microcredits; group lending; public goods; laboratory experiments; development economics;
Other versions of this item:
- Klaus Abbink & Bernd Irlenbusch & Elke Renner, 2006. "Group Size and Social Ties in Microfinance Institutions," Economic Inquiry, Western Economic Association International, vol. 44(4), pages 614-628, October.
- Klaus Abbink & Bernd Irlenbusch, 2004. "Group Size and Social Ties in Microfinance Institutions," Econometric Society 2004 Far Eastern Meetings 404, Econometric Society.
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-06-16 (All new papers)
- NEP-EXP-2003-06-16 (Experimental Economics)
- NEP-PBE-2003-06-16 (Public Economics)
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