Advanced Search
MyIDEAS: Login to save this paper or follow this series

Group lending or individual lending? Evidence from a randomised field experiment in Mongolia

Contents:

Author Info

  • Attanasio, Orazio
  • Augsburg, Britta
  • de Haas, Ralph
  • Fitzsimons, Emla
  • Harmgart, Heike

Abstract

Although microfinance institutions across the world are moving from group lending towards individual lending, this strategic shift is not substantiated by sufficient empirical evidence on the impact of both types of lending on borrowers. We present such evidence from a randomised field experiment in rural Mongolia. We find a positive impact of access to group loans on food consumption and entrepreneurship. Among households that were offered group loans the likelihood of owning an enterprise increases by 10 per cent more than in control villages. Enterprise profits increase over time as well, particularly for the less-educated. For individual lending on the other hand, we detect no significant increase in consumption or enterprise ownership. These results are in line with theories that stress the disciplining effect of group lending: joint liability may deter borrowers from using loans for non-investment purposes. Our results on informal transfers are consistent with this hypothesis. Borrowers in group-lending villages are less likely to make informal transfers to families and friends while borrowers in individual-lending villages are more likely to do so. We find no significant difference in repayment rates between the two lending programmes, neither of which en-tailed weekly repayment meetings. --

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econstor.eu/bitstream/10419/93060/1/779360893.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Economics of Change with number SP II 2014-303.

as in new window
Length:
Date of creation: 2014
Date of revision:
Handle: RePEc:zbw:wzbeoc:spii2014303

Contact details of provider:
Postal: Reichpietschufer 50, 10785 Berlin, Germany
Phone: ++49 - 30 - 25491 - 0
Fax: ++49 - 30 - 25491 - 684
Email:
Web page: http://www.wzb.eu/
More information through EDIRC

Related research

Keywords: group lending; poverty; access to finance; randomised field experiment;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Shahidur R. Khandker, 2005. "Microfinance and Poverty: Evidence Using Panel Data from Bangladesh," World Bank Economic Review, World Bank Group, World Bank Group, vol. 19(2), pages 263-286.
  2. Cull, Robert & Demirguc-Kunt, Asli & Morduch, Jonathan, 2008. "Microfinance meets the market," Policy Research Working Paper Series 4630, The World Bank.
  3. Xavier Giné & Dean Karlan, 2009. "Group versus Individual Liability: Long Term Evidence from Philippine Microcredit Lending Groups," Working Papers, Economic Growth Center, Yale University 970, Economic Growth Center, Yale University.
  4. Ghatak, Maitreesh & Guinnane, Timothy W., 1999. "The economics of lending with joint liability: theory and practice," Journal of Development Economics, Elsevier, Elsevier, vol. 60(1), pages 195-228, October.
  5. Bhole, Bharat & Ogden, Sean, 2010. "Group lending and individual lending with strategic default," Journal of Development Economics, Elsevier, Elsevier, vol. 91(2), pages 348-363, March.
  6. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2008. "Are women more credit constrained ? experimental evidence on gender and microenterprise returns," Policy Research Working Paper Series 4746, The World Bank.
  7. Fafchamps, Marcel & McKenzie, David & McKenzie, David & Quinn, Simon & Woodruff, Christopher, 2011. "When is capital enough to get female enterprises growing ? evidence from a randomized experiment in Ghana," Policy Research Working Paper Series 5706, The World Bank.
  8. Erica Field & Rohini Pande, 2008. "Repayment Frequency and Default in Microfinance: Evidence From India," Journal of the European Economic Association, MIT Press, MIT Press, vol. 6(2-3), pages 501-509, 04-05.
  9. Joseph P. Kaboski & Robert M. Townsend, 2011. "A Structural Evaluation of a Large‐Scale Quasi‐Experimental Microfinance Initiative," Econometrica, Econometric Society, Econometric Society, vol. 79(5), pages 1357-1406, 09.
  10. Ghatak, Maitreesh, 2000. "Screening by the Company You Keep: Joint Liability Lending and the Peer Selection Effect," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(465), pages 601-31, July.
  11. Fafchamps, Marcel; McKenzie; Quinn, Simon; Woodruff, Christopher, 2011. "When is capital enough to get female microenterprises growing? Evidence from a randomized experiment in Ghana," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 50, Competitive Advantage in the Global Economy (CAGE).
  12. Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, Elsevier, vol. 60(1), pages 27-50, October.
  13. Gine, Xavier & Jakiela, Pamela & Karlan, Dean & Morduch, Jonathan, 2006. "Microfinance games," Policy Research Working Paper Series 3959, The World Bank.
  14. Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," World Bank Economic Review, World Bank Group, World Bank Group, vol. 4(3), pages 351-66, September.
  15. Shubhashis Gangopadhyay & Maitreesh Ghatak & Robert Lensink, 2005. "Joint Liability Lending and the Peer Selection Effect," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(506), pages 1005-1015, October.
  16. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, Elsevier, vol. 46(1), pages 1-18, February.
  17. Guinnane, T. & Banerjee, A. & Besley, T., 1993. "Thy Neighbor's Keeper: the Design of a Credit Cooperative with Theory and a Test," Papers, Yale - Economic Growth Center 705, Yale - Economic Growth Center.
  18. Joseph P. Kaboski & Robert M. Townsend, 2005. "Policies and Impact: An Analysis of Village-Level Microfinance Institutions," Journal of the European Economic Association, MIT Press, MIT Press, vol. 3(1), pages 1-50, 03.
  19. Fenella Carpena & Shawn Cole & Jeremy Shapiro & Bilal Zia, 2013. "Liability Structure in Small-Scale Finance: Evidence from a Natural Experiment," World Bank Economic Review, World Bank Group, World Bank Group, vol. 27(3), pages 437-469.
  20. Mark M. Pitt & Shahidur R. Khandker, 1998. "The Impact of Group-Based Credit Programs on Poor Households in Bangladesh: Does the Gender of Participants Matter?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(5), pages 958-996, October.
  21. Wydick, Bruce, 1999. "Can Social Cohesion Be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(457), pages 463-75, July.
  22. Britta Augsburg & Ralph De Haas & Heike Harmgart & Costas Meghir, 2012. "Microfinance at the margin: Experimental evidence from Bosnia and Herzegovina," IFS Working Papers, Institute for Fiscal Studies W12/15, Institute for Fiscal Studies.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:wzbeoc:spii2014303. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.