To switch or not to switch - Can individual lending do better in microfinance than group lending?

Helke Waelde

No 1106, Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz

Abstract: These days it has been witnessed, that banks other individual loans instead of group loans and develop products based on individual liability in developing coun- tries. In order to study this surprising turn, we expand the conventional approach on decision making of individuals. A social prestige function is introduced that re- ‡ects the non-monetary impacts of group membership on the individual and on her decisions. If a borrower possesses more than a critical level of wealth, it is optimal for her to switch to individual borrowing. From a welfare perspective, a mixture of individual and group loans is desirable. However, the average borrower switches from group to individual lending too soon.

JEL-codes: D44 E43 E52 E58 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2011-03-07, Revised 2011-03-07
New Economics Papers: this item is included in nep-ban, nep-mac, nep-mfd and nep-mic
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://download.uni-mainz.de/RePEc/pdf/Discussion_Paper_1106.pdf First version, 2011 (application/pdf)

Related works:
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:jgu:wpaper:1106

Access Statistics for this paper

More papers in Working Papers from Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz Contact information at EDIRC.
Bibliographic data for series maintained by Research Unit IPP ().