Key Factors of Joint-Liability Loan Contracts: An Empirical Analysis
AbstractWe empirically examine the efficacy of various incentives of microlending contracts such as joint-liability or group access to future loans. We find that joint liability induces a group formation of low risk borrowers. Furthermore, the incentive system leads to peer measures between the borrowers, helping the lender to address the moral hazard and enforcement problem. We also demonstrate that the mechanism realizes high repayment rates, if the loan officers fulfill their complementary duties in the screening and enforcement process. Finally, we show that dynamic incentives have to be restricted if the two problems of joint-liability are to be tackled notably. --
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Bibliographic InfoPaper provided by European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics in its series Discussion Papers with number 231.
Date of creation: 2005
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Other versions of this item:
- Alexander S. Kritikos & Denitsa Vigenina, 2005. "Key Factors of Joint-Liability Loan Contracts: An Empirical Analysis," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 213-238, 04.
- O22 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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