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The Economics of Lending with Joint Liability: Theory and Practice

Author

Listed:
  • Maitreesh Ghatak
  • Timothy W. Guinnane

    (Economic Growth Center, Yale University)

Abstract

Institutions that rely on joint liability to facilitate lending to the poor have a long history and are now a common feature of many developing countries. Economists have proposed several theories of joint liability lending that stress various aspects of its informational and enforcement advantages over other forms of lending. This paper analyzes how joint-liability lending promotes screening, monitoring, state verification, and enforcement of repayment. An empirical section draws on case studies to highlight how joint liability works in practice.

Suggested Citation

  • Maitreesh Ghatak & Timothy W. Guinnane, 1998. "The Economics of Lending with Joint Liability: Theory and Practice," Working Papers 791, Economic Growth Center, Yale University.
    • Handle: RePEc:egc:wpaper:791
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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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