Interest Rates In Group Lending: A Behavioural Investigation
Microfinance institutions (MFIs) serve more than 5 million households in developing countries. A crucial variable for MFI schemes is the interest rate to be charged from borrowers. This paper studies the behavioural impacts of the repayment burden on repayment performance. In a laboratory experiment, we vary the amount a borrower group has to repay and study how this affects free-riding behaviour. We can identify two counteracting effects: a higher repayment burden intensifies the incentives to free-ride as shirking saves more money. On the other hand, high-interest loans are less tolerant towards defaulters, which exerts a disciplining effect. Copyright 2006 Blackwell Publishing Ltd
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 11 (2006)
Issue (Month): 2 (06)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=1361-374X|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=1361-374X|
When requesting a correction, please mention this item's handle: RePEc:bla:pacecr:v:11:y:2006:i:2:p:185-199. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.