Do Peer Group Members Outperform Individual Borrowers? A Test of Peer Group Lending Using Canadian Micro-Credit Data
Microfinance institutions now serve over 10 million poor households in the developing and developed world, and much of their success has been attributed to their innovative use of peer group lending. There is very little empirical evidence, however, to suggest that group lending schemes offer a superior institutional design over lending programs that serve individual borrowers. The authors find empirical evidence that group lending does indeed lower borrower default rates more than conventional individual lending, and that this effect operates through the dual channels of selection into the peer lending program and, once inside the program, greater group borrower effort.
|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada|
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
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.:
- Rafael Gomez & Eric Santor, 2001.
"Membership has its priveleges : the effect of social capital and neighbourhood characteristics on the earnings of microfinance borrowers,"
LSE Research Online Documents on Economics
361, London School of Economics and Political Science, LSE Library.
- Rafael Gomez & Eric Santor, 2001. "Membership has its privileges: the effect of social capital and neighbourhood characteristics on the earnings of microfinance borrowers," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 943-966, November.
- De Meza, D. & Southey, C., 1995.
"The Borrower's Curse: Optimism, Finance and Enterpreneurship,"
9502, Exeter University, Department of Economics.
- de Meza, David & Southey, Clive, 1996. "The Borrower's Curse: Optimism, Finance and Entrepreneurship," Economic Journal, Royal Economic Society, vol. 106(435), pages 375-86, March.
- Edward P. Lazear, 1999. "Personnel Economics: Past Lessons and Future Directions," NBER Working Papers 6957, National Bureau of Economic Research, Inc.
- Abhijit V. Banerjee & Timothy Besley & Timothy W. Guinnane, 1994.
"Thy Neighbor's Keeper: The Design of a Credit Cooperative with Theory and a Test,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 109(2), pages 491-515.
- Guinnane, T. & Banerjee, A. & Besley, T., 1993. "Thy Neighbor's Keeper: the Design of a Credit Cooperative with Theory and a Test," Papers 705, Yale - Economic Growth Center.
- Wydick, Bruce, 2001. "Group Lending under Dynamic Incentives as a Borrower Discipline Device," Review of Development Economics, Wiley Blackwell, vol. 5(3), pages 406-20, October.
- Besley, Timothy & Coate, Stephen, 1995.
"Group lending, repayment incentives and social collateral,"
Journal of Development Economics,
Elsevier, vol. 46(1), pages 1-18, February.
- Besley, T. & Coate, S., 1991. "Group Lending, Repayment Incentives And Social Collateral," Papers 152, 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.
- Douglas Staiger & James H. Stock, 1994.
"Instrumental Variables Regression with Weak Instruments,"
NBER Technical Working Papers
0151, National Bureau of Economic Research, Inc.
- Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
- James J. Heckman & Jeffrey A. Smith, 1995. "Assessing the Case for Social Experiments," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 85-110, Spring.
- Laffont, Jean-Jacques, 2000.
"Collusion and Group Lending with Adverse Selection,"
IDEI Working Papers
95, Institut d'Économie Industrielle (IDEI), Toulouse.
- Laffont, Jean-Jacques, 2003. "Collusion and group lending with adverse selection," Journal of Development Economics, Elsevier, vol. 70(2), pages 329-348, April.
- Jean-Jacques Laffont, 2000. "Collusion and Group Lending with Adverse Selection," Development Working Papers 147, Centro Studi Luca d'Agliano, University of Milano.
- Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
- James J. Heckman, 1989.
"Choosing Among Alternative Nonexperimental Methods for Estimating the Impact of Social Programs: The Case of Manpower Training,"
NBER Working Papers
2861, National Bureau of Economic Research, Inc.
- Heckman, J.J. & Hotz, V.J., 1988. "Choosing Among Alternative Nonexperimental Methods For Estimating The Impact Of Social Programs: The Case Of Manpower Training," University of Chicago - Economics Research Center 88-12, Chicago - Economics Research Center.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Varian, H.R., 1989. "Monitoring Agents With Other Agents," Papers 89-18, Michigan - Center for Research on Economic & Social Theory.
- Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," World Bank Economic Review, World Bank Group, vol. 4(3), pages 351-66, September.
- Zeller, Manfred, 1996. "Determinants of repayment performance in credit groups," FCND discussion papers 13, International Food Policy Research Institute (IFPRI).
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- Armendariz de Aghion, Beatriz, 1999. "On the design of a credit agreement with peer monitoring," Journal of Development Economics, Elsevier, vol. 60(1), pages 79-104, October.
- Greene, William, 1998. "Sample selection in credit-scoring models1," Japan and the World Economy, Elsevier, vol. 10(3), pages 299-316, July.
- Jonathan Conning, 2005. "Monitoring by Peers or by Delegates? Joint Liability Loans and Moral Hazard," Economics Working Paper Archive at Hunter College 407, Hunter College Department of Economics.
- Barbara Sianesi, 2001. "Propensity score matching," United Kingdom Stata Users' Group Meetings 2001 12, Stata Users Group, revised 23 Aug 2001.
- 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, vol. 106(5), pages 958-996, 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 463-75, July.
- Petra E. Todd & Jeffrey A. Smith, 2001. "Reconciling Conflicting Evidence on the Performance of Propensity-Score Matching Methods," American Economic Review, American Economic Association, vol. 91(2), pages 112-118, May.
- de Aghion, Beatriz Armendariz & Gollier, Christian, 2000. "Peer Group Formation in an Adverse Selection Model," Economic Journal, Royal Economic Society, vol. 110(465), pages 632-43, July.
When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:03-33. 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: ()
If references are entirely missing, you can add them using this form.