IDEAS home Printed from https://ideas.repec.org/p/wil/wileco/2004-08.html
   My bibliography  Save this paper

Cosigned Or Group Loans

Author

Listed:

Abstract

We analyze lending contracts when social sanctions are used to enforce repayments and borrowers differ in their unobserved sanctioning abilities. Symmetric group loans are preferred to cosigned loans when borrowers are relatively equal, and cosigned loans are preferred when borrowers are unequal. This explains why microlenders that target the poor (e.g., the Grameen Bank) use symmetric group loans while other untargeted lenders use cosigned loans. Complicated menus of loan contracts that induce borrowers to self select can do no better than these simple loan contracts unless borrowers are very productive. In particular, we explain why group lending arrangements offering different loan terms to members of the same group are seldom observed.

Suggested Citation

  • Philip Bond & Ashok S. Rai, 2004. "Cosigned Or Group Loans," Department of Economics Working Papers 2004-08, Department of Economics, Williams College.
  • Handle: RePEc:wil:wileco:2004-08
    as

    Download full text from publisher

    File URL: http://web.williams.edu/Economics/wp/rai_jun04.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 209-244.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Microcredit; Social Sanctions; Grameen Bank;

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wil:wileco:2004-08. 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: (Stephen Sheppard). General contact details of provider: http://edirc.repec.org/data/edwilus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.