Group Lending Without Joint Liability

Thiemo Fetzer, Maitreesh Ghatak and Jonathan de Quidt

STICERD - Economic Organisation and Public Policy Discussion Papers Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: This paper contrasts individual liability lending with and without groups to joint liability lending. By doing so, we shed light on an apparent shift away from joint liability lending towards individual liability lending by some microfinance institutions First we show that individual lending with or without groups may constitute a welfare improvement so long as borrowers have sufficient social capital to sustain mutual insurance. Second, we explore how a purely mechanical argument in favor of the use of groups - namely lower transaction costs - may actually be used explicitly by lenders to encourage the creation of social capital. We also carry out some simulations to evaluate quantitatively the welfare impact of alternative forms of lending, and how they relate to social capital.

Keywords: microfinance; group lending; joint liability; mutual insurance (search for similar items in EconPapers)
JEL-codes: G11 G21 O12 O16 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-ban, nep-ias, nep-mfd and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://sticerd.lse.ac.uk/dps/eopp/eopp44.pdf (application/pdf)

Related works:
Journal Article: Group lending without joint liability (2016)
Working Paper: Group Lending Without Joint Liability (2013)
Working Paper: Group lending without joint liability (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:stieop:044

Access Statistics for this paper

More papers in STICERD - Economic Organisation and Public Policy Discussion Papers Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE
Bibliographic data for series maintained by ().