Determinants of microcredit repayment in federations of Indian self-help groups
Since the establishment of the Grameen Bank in Bangladesh in 1976, microfinance has boomed. As of December 31, 2007, 3,552 microcredit institutions had reached 154 million clients worldwide, about 106.6 million of whom were among the poorest when they took their first loan. Such expansion can be at least partly attributed to the widely adopted practice of group lending in microfinance programs. In contrast to individual lending, group lending (or joint liability) grants a loan to a group of borrowers, and the whole group is liable for the debt of any individual member in the group. This practice allows microfinance programs to rely mainly on accountability and mutual trust among group members rather than financial collateral to insure against default. Given that the poor often lack appropriate financial collateral, group lending programs offer a feasible way of extending credit to poor people who are usually kept out of traditional banking systems. There is considerable debate about whether such groups can be sustainable, achieving sound repayment performance while serving poor borrowers. The factors affecting repayment performance are thus of great policy relevance. This brief examines whether and how much repayment is affected by three factors: the source of the loan, groups’ provision of public goods in the form of insurance substitutes, and the monitoring and repayment rules of the federations of groups. The data come from more than 2,000 self-help groups (SHGs), federated in 299 village organizations in the Indian state of Andhra Pradesh. The SHGs under study were supported by a large World Bank program called the Indira Kranti Patham (IKP) program, with a cost of US$260 million. The program has been replicated in other states in India and may be replicated in other countries. A better understanding of factors influencing repayment will therefore help improve the performance and advance of the program.
|Date of creation:||2010|
|Contact details of provider:|| Postal: 1201 Eye Street, NW, Washington, DC 20005-3915|
Web page: http://www.ifpri.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fpr:2020br:18(7). 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 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.