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Joint liability lending: a note

Author

Listed:
  • Gangopadhyay, Shubhashis
  • Lensink, Robert

    (Groningen University)

Abstract

This note argues that the joint liability contracting equilibria worked out in Ghatak(2000) have a serious drawback in that, even though incentive compatible ex ante, they violate ex post rationality. For such contracts to be feasible, banks should be able to extract more under failure than under success. However, when we alllow for this, it may help explain some important empirical observations on joint liability lending.

Suggested Citation

  • Gangopadhyay, Shubhashis & Lensink, Robert, 2001. "Joint liability lending: a note," Research Report 01E09, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    • Handle: RePEc:gro:rugsom:01e09
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    File URL: http://irs.ub.rug.nl/ppn/218034598
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    References listed on IDEAS

    as
    1. Ghatak, Maitreesh, 2000. "Screening by the Company You Keep: Joint Liability Lending and the Peer Selection Effect," Economic Journal, Royal Economic Society, vol. 110(465), pages 601-631, July.
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    Cited by:

    1. Abdelhamid, El Bouhadi & Omar, Essardi, 2007. "Micro-microcrédit et asymétries d’information : cas du Maroc [INFORMATION asymmetries and microcredit: The Moroccan case]," MPRA Paper 20080, University Library of Munich, Germany.
    2. Alessandro Fedele, 2006. "Joint Liability Lending In Microcredit Markets With Adverse Selection: A Survey," The IUP Journal of Bank Management, IUP Publications, vol. 0(2), pages 55-63, May.

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