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Does the group leader matter? The impact of monitoring activities and social ties of group leaders on the repayment performance of groupbased lending Eritrea

Author

Listed:
  • Hermes, Niels
  • Lensink, Robert
  • Mehrteab, Habteab T.

    (Groningen University)

Abstract

This paper analyzes whether the effects of monitoring and social ties of the group leader and other group members on repayment performance of groups differ, using data from an extensive questionnaire held in Eritrea among participants of 102 groups. We hypothesize that the monitoring activities and social ties of the group leader have a stronger positive impact on the repayment performance of groups. The results show that social ties of the group leader do have a positive effect on repayment performance of groups, whereas this is not true for social ties of other group members. We do not find evidence for the hypothesis that monitoring activities of the group leader have a stronger positive impact on group repayment performance. All variables measuring monitoring activities, either of the group leader or the other group members, are found to be statistically insignificant.

Suggested Citation

  • Hermes, Niels & Lensink, Robert & Mehrteab, Habteab T., 2005. "Does the group leader matter? The impact of monitoring activities and social ties of group leaders on the repayment performance of groupbased lending Eritrea," Research Report 05E05, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  • Handle: RePEc:gro:rugsom:05e05
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    References listed on IDEAS

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    1. Paxton, Julia & Graham, Douglas & Thraen, Cameron, 2000. "Modeling Group Loan Repayment Behavior: New Insights from Burkina Faso," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 639-655, April.
    2. Lapenu, Cécile & Zeller, Manfred, 2001. "Distribution, growth, and performance of microfinance institutions in Africa, Asia, and Latin America," FCND briefs 114, International Food Policy Research Institute (IFPRI).
    3. 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.
    4. 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.
    5. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    6. Mark Wenner, 1995. "Group credit: A means to improve information transfer and loan repayment performance," Journal of Development Studies, Taylor & Francis Journals, vol. 32(2), pages 263-281.
    7. Sharma, Manohar & Zeller, Manfred, 1997. "Repayment performance in group-based credit programs in Bangladesh: An empirical analysis," World Development, Elsevier, vol. 25(10), pages 1731-1742, October.
    8. 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.
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    Cited by:

    1. Luminita Postelnicu & Niels Hermes & Roselia Servin Juarez, 2015. "Social Capital and the Repayment of Microfinance Group Lending. A Case Study of Pro Mujer Mexico," Working Papers CEB 15-023, ULB -- Universite Libre de Bruxelles.
    2. Carli, Francesco & Uras, R.B., 2014. "Optimal Joint Liability Lending and with Costly Peer Monitoring," Discussion Paper 2014-075, Tilburg University, Center for Economic Research.
    3. Lalitagauri Kulkarni, 2017. "Financial efficiency versus social outreach of Indian microfinance institutions: mission drift or character shift?," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 19(2), pages 323-340, October.
    4. repec:dgr:rugsom:07004 is not listed on IDEAS
    5. Carli, Francesco & Uras, Burak R., 2017. "Joint-liability with endogenously asymmetric group loan contracts," Journal of Development Economics, Elsevier, vol. 127(C), pages 72-90.
    6. Luminita Postelnicu & Niels Hermes & Ariane Szafarz, 2013. "Defining Social Collateral in Microfinance Group Lending," Working Papers CEB 13-050, ULB -- Universite Libre de Bruxelles.
    7. Ibtissem Baklouti, 2013. "Determinants of Microcredit Repayment: The Case of Tunisian Microfinance Bank," African Development Review, African Development Bank, vol. 25(3), pages 370-382, September.
    8. Lensink, Robert & Eijkel, Remco van & Hermes, Niels, 2007. "Group lending and the role of the group leader:Theory and evidence from Eritrea," Research Report 07004, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    9. Mahreen Mahmud, 2020. "Repaying Microcredit Loans: A Natural Experiment on Liability Structure," Journal of Development Studies, Taylor & Francis Journals, vol. 56(6), pages 1161-1176, June.
    10. Omar Sene, 2017. "Measures of Trust and Participation in Collective Actions: Evidence from Rural Senegal," African Development Review, African Development Bank, vol. 29(3), pages 498-511, September.
    11. Luminita Postelnicu & Niels Hermes & Ariane Szafarz, 2014. "Defining Social Collateral in Microfinance Group Lending," Palgrave Studies in Impact Finance, in: Roy Mersland & R. Øystein Strøm (ed.), Microfinance Institutions, chapter 10, pages 187-207, Palgrave Macmillan.
    12. Luminita Postelnicu, 2012. "Social Capital and Repayment Performance of Group Lending in Microfinance," Working Papers CEB 12-032, ULB -- Universite Libre de Bruxelles.
    13. Subir Bairagi & Azzeddine Azzam, 2014. "Does the Grameen Bank exert market power over borrowers?," Applied Economics Letters, Taylor & Francis Journals, vol. 21(12), pages 866-869, August.

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