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 Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 404.
Date of creation: 11 Aug 2004
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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.
- Abbink, Klaus & Bernd Irlenbusch & Elke Renner, 2002. "Group Size and Social Ties in Microfinance Institutions," Royal Economic Society Annual Conference 2003 1, Royal Economic Society.
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
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