Joint-liability borrowing decisions under risk: Empirical evidence from rural microfinance in Ethiopia
This paper investigates borrowing decisions of rural households from a microfinance in Tigray, Ethiopia using household panel data on 5 years and a dynamic panel probit model. The theoretical model takes two types of risk involved in joint-liability lending explicitly into account: risk of partner failure and the risk of losing future access to credit. Empirical results show that these risks are important in explaining borrowing decisions. Another finding is that the probability of repeat-borrowing is higher than the probability of new participation, with possible implications that perceived joint-liability threats deter participation and easing stringent punishments might help poor households’ access to credit.
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- Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
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- Jerome Adda & Russell W. Cooper, 2003. "Dynamic Economics: Quantitative Methods and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012014, July. Full references (including those not matched with items on IDEAS)
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