Graduating from Group to Individual Loans, with the Help of Personal Guarantees

Vasso Ioannidou, Sheng Li, Mrinal Mishra and Steven Ongena
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Vasso Ioannidou: Centre for Economic Policy Research (CEPR)
Sheng Li: University of Zurich
Mrinal Mishra: University of Zurich - Department of Banking and Finance; Swiss Finance Institute

No 22-50, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Loans granted by banks to several entrepreneurs jointly, but for their own individual business and/or projects, are rarely studied. Analyzing 32 million month-loan observations from the Bolivian credit register, we establish that group loans comprise a sizeable part of the formal credit market, and that the most common group size equals two. Larger than individual loans, per borrower the group loans are smaller, with a longer duration and lower loan rates than individual loans. When borrowers are immature, they obtain credit through group loans. Later, involving personal guarantees, they are more likely to graduate to obtain credit through individual loans.

Keywords: group loan; individual loan; micro credit (search for similar items in EconPapers)
JEL-codes: G20 O16 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2022-06
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-mfd
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2250

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