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Borrowers’ Participation in Group Borrowing

Listed author(s):
  • Tutlani, Ankur
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    Borrowers’ participation in MFI group lending credit market is not insured because of the alternative sources of credit available. The question arises what is the ideal MFI interest rate to ensure borrowers’ participation which at the same time being financially viable for MFI. The paper attempts to answer this question and analyzes the borrowers’ trade-off of borrowing from MFI or from moneylender (ML). Results show that borrowers may find comparative advantage in borrowing individually from ML as compared to borrowing in a group from MFI if the transaction cost burden is high and their credit requirement is low

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    File URL: https://mpra.ub.uni-muenchen.de/69506/1/MPRA_paper_69505.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 69506.

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    Date of creation: 12 Feb 2016
    Handle: RePEc:pra:mprapa:69506
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    1. Bhatt, Nitin & Tang, Shui-Yan, 1998. "The problem of transaction costs in group-based microlending: An institutional perspective," World Development, Elsevier, vol. 26(4), pages 623-637, April.
    2. Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
    3. Sarmistha Pal, 2002. "Household sectoral choice and effective demand for rural credit in India," Applied Economics, Taylor & Francis Journals, vol. 34(14), pages 1743-1755.
    4. Jain, Sanjay, 1999. "Symbiosis vs. crowding-out: the interaction of formal and informal credit markets in developing countries," Journal of Development Economics, Elsevier, vol. 59(2), pages 419-444, August.
    5. de Aghion, Beatriz Armendariz & Gollier, Christian, 2000. "Peer Group Formation in an Adverse Selection Model," Economic Journal, Royal Economic Society, vol. 110(465), pages 632-643, July.
    6. Ahmed, Zia U., 1989. "Effective costs of rural loans in Bangladesh," World Development, Elsevier, vol. 17(3), pages 357-363, March.
    7. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
    8. Abhijit V. Banerjee & Esther Duflo, 2010. "Giving Credit Where It Is Due," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 61-80, Summer.
    9. Thibaut Dehem & Marek Hudon, 2013. "Microfinance from the Clients' Perspective: An Empirical Enquiry into Transaction Costs in Urban and Rural India," Oxford Development Studies, Taylor & Francis Journals, vol. 41(sup1), pages 117-132, August.
    10. Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," World Bank Economic Review, World Bank Group, vol. 4(3), pages 351-366, September.
    11. Bose, Pinaki, 1998. "Formal-informal sector interaction in rural credit markets," Journal of Development Economics, Elsevier, vol. 56(2), pages 265-280, August.
    12. Jain, Sanjay & Mansuri, Ghazala, 2003. "A little at a time: the use of regularly scheduled repayments in microfinance programs," Journal of Development Economics, Elsevier, vol. 72(1), pages 253-279, October.
    13. Erica Field & Rohini Pande, 2008. "Repayment Frequency and Default in Microfinance: Evidence From India," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 501-509, 04-05.
    14. Giné, Xavier, 2011. "Access to capital in rural Thailand: An estimated model of formal vs. informal credit," Journal of Development Economics, Elsevier, vol. 96(1), pages 16-29, September.
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