Determinants of Moral hazard in Microfinance: Empirical Evidence from Joint Liability Lending Schemes in Malawi
Moral hazard is widely reported as a problem in credit and insurance markets, mainly arising from information asymmetry. Although theorists have attempted to explain the success of Joint Liability Lending (JLL) schemes in mitigating moral hazard, empirical studies are rare. This paper investigates the determinants of moral hazard among JLL schemes from Malawi, using group level data from 99 farm and non-farm credit groups. Results reveal that peer selection, peer monitoring, peer pressure, dynamic incentives and variables capturing the extent of matching problems explain most of the variation in the incidence of moral hazard among credit groups. The implications are that Joint Liability Lending institutions will continue to rely on social cohesion and dynamic incentives as a means to enhancing their performance which has a direct implication on their outreach, impact and sustainability.
|Date of creation:||2006|
|Contact details of provider:|| Web page: http://www.iaae-agecon.org/|
More information through EDIRC
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.:
- Ghatak, Maitreesh & Guinnane, Timothy W., 1999.
"The economics of lending with joint liability: theory and practice,"
Journal of Development Economics,
Elsevier, vol. 60(1), pages 195-228, October.
- Ghatak, M. & Guinnane, T.W., 1998. "The Economics of Lending with Joint Liability: Theory and Practice," Papers 791, Yale - Economic Growth Center.
- Maitreesh Ghatak & Timothy W. Guinnane, 1998. "The Economics of Lending with Joint Liability: Theory and Practice," Discussion Papers 98-16, University of Copenhagen. Department of Economics.
- Maitreesh Ghatak & Timothy W. Guinnane, 1998. "The Economics of Lending with Joint Liability: Theory and Practice," Working Papers 791, Economic Growth Center, Yale University.
- Che Yeon-Koo, 2002. "Joint Liability and Peer Monitoring under Group Lending," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 2(1), pages 1-28, July.
- Guinnane Timothy W., 1994. "A Failed Institutional Transplant: Raiffeisen's Credit Cooperatives in Ireland, 1894-1914," Explorations in Economic History, Elsevier, vol. 31(1), pages 38-61, January.
- Guinnane, T.W., 1992. "A Failed Institutional Transplant: Raiffeisen's Credit Cooperatives in Ireland, 1894-1914," Papers 165, Princeton, Woodrow Wilson School - Development Studies.
- Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
- Wydick, Bruce, 1999. "Can Social Cohesion Be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala," Economic Journal, Royal Economic Society, vol. 109(457), pages 463-475, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ags:iaae06:25287. 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: (AgEcon Search)
If references are entirely missing, you can add them using this form.