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Group-lending: Sequential financing, lender monitoring and joint liability Author info | Abstract | Publisher info | Download info | Related research | Statistics Prabal Roy Chowdhury () (Indian Statistical Institute, New Delhi)
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We develop a simple model of group-lendingbased on peer monitoring and moral hazard. We find that, in the absence of sequential financing or lender monitoring, group-lending schemes may involve under-monitoring with the borrowers investing in undesirable projects. Moreover, under certain parameter configurations, group-lending schemes involving either sequential financing, or a combination of lender monitoringand joint liability are feasible. In fact, group-lending schemes with sequential financing may succeed even in the absence of joint liability, though the repayment rate will be lower. In the absence of joint liability, however, group-lending with lender monitoring is unlikely to be feasible.
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Paper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number
04-10.
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Length: 32 pages
Date of creation: Dec 2003Date of revision:
Handle: RePEc:ind:isipdp:04-10Contact details of provider: Postal: 7, S. J. S. Sansanwal Marg, New Delhi - 110016 Phone: 91-11-6564789 Fax: 91-11-6856779 Web page: http://www.isid.ac.in More information through EDIRC
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Keywords: Group-lending ; joint liability ; peer monitoring ; sequential financing ; under-monitoring ; lender monitoring ; Other versions of this item:
Find related papers by JEL classification: G2 - Financial Economics - - Financial Institutions and Services O2 - Economic Development, Technological Change, and Growth - - Development Planning and Policy
This paper has been announced in the following NEP Reports :
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Full
references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Becchetti Leonardo & Pisani Fabio, 2006.
"Microfinance with divisible investment projects ,"
Departmental Working Papers
242, Tor Vergata University, CEIS.
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Prabal Roy Chowdhury, 2004.
"Group-lending with sequential financing, joint liability and social capital ,"
Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers
04-23, Indian Statistical Institute, New Delhi, India.
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Prabal Roy Chowdhury, 2006.
"Group-lending with sequential financing, contingent renewal and social capital ,"
Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers
06-01, Indian Statistical Institute, New Delhi, India.
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Other versions: Timothy N. Cason & Lata Gangadharan & Pushkar Maitra, 2008.
"Moral Hazard and Peer Monitoring in a Laboratory Microfinance Experiment ,"
Purdue University Economics Working Papers
1208, Purdue University, Department of Economics.
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Becchetti Leonardo & Pisani Fabio, 2007.
"Promoting access to credit for small uncollateralized producers: moral hazard, subsidies and local externalities under different group lending market structures ,"
Departmental Working Papers
249, Tor Vergata University, CEIS.
[Downloadable!]
Soyolmaa Batbekh and & Keith Blackburn, 2008.
"On the Macroeconomics of Microfi?nance ,"
Centre for Growth and Business Cycle Research Discussion Paper Series
106, Economics, The Univeristy of Manchester.
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