Joint-liability borrowing decisions under risk: Empirical evidence from rural microfinance in Ethiopia

Guush Berhane and Cornelis Gardebroek

No 44202, 2008 International Congress, August 26-29, 2008, Ghent, Belgium from European Association of Agricultural Economists

Abstract: This paper investigates borrowing decisions of rural households from a microfinance in Tigray, Ethiopia using household panel data on 5 years and a dynamic panel probit model. The theoretical model takes two types of risk involved in joint-liability lending explicitly into account: risk of partner failure and the risk of losing future access to credit. Empirical results show that these risks are important in explaining borrowing decisions. Another finding is that the probability of repeat-borrowing is higher than the probability of new participation, with possible implications that perceived joint-liability threats deter participation and easing stringent punishments might help poor households’ access to credit.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 5
Date: 2008
New Economics Papers: this item is included in nep-dev and nep-mfd
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae08:44202

DOI: 10.22004/ag.econ.44202

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