IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Group lending and self-help groups: joint benefit as an alternative governance mechanism

Listed author(s):
  • Sukanta Bhattacharya
  • Sarmila Banerjee
  • Sirshendu Mukherjee
Registered author(s):

    Lending to the rural poor in developing economies, although crucial from the perspective of poverty management, is often subjected to severe informational problems. The literature on group lending with joint liability attempts to resolve these problems by making failure more costly for the borrowers. We take a different approach. In a model of lending with moral hazard, we show that rewarding group success by promising a joint benefit can be used as an alternative mechanism to solve informational problems. We also show that, unlike joint liabilitymechanism, this joint-benefit mechanism would ensure higher repayment probability even in the absence of peer-monitoring. Moreover, in this model, the optimal group size can be endogenously determined.

    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:
    Download Restriction: Access to full text is restricted to subscribers.

    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.

    Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

    Volume (Year): 17 (2008)
    Issue (Month): 1 ()
    Pages: 1-19

    in new window

    Handle: RePEc:taf:jitecd:v:17:y:2008:i:1:p:1-19
    DOI: 10.1080/09638190701727752
    Contact details of provider: Web page:

    Order Information: Web:

    No references listed on IDEAS
    You can help add them by filling out this form.

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

    When requesting a correction, please mention this item's handle: RePEc:taf:jitecd:v:17:y:2008:i:1:p:1-19. 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: (Michael McNulty)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.