Borrowers’ Participation in Group Borrowing

Ankur Tutlani

MPRA Paper from University Library of Munich, Germany

Abstract: Borrowers’ participation in MFI group lending credit market is not insured because of the alternative sources of credit available. The question arises what is the ideal MFI interest rate to ensure borrowers’ participation which at the same time being financially viable for MFI. The paper attempts to answer this question and analyzes the borrowers’ trade-off of borrowing from MFI or from moneylender (ML). Results show that borrowers may find comparative advantage in borrowing individually from ML as compared to borrowing in a group from MFI if the transaction cost burden is high and their credit requirement is low

Keywords: Microfinance; Group lending; Informal finance; Transaction cost; Effective cost (search for similar items in EconPapers)
JEL-codes: G21 O17 (search for similar items in EconPapers)
Date: 2016-02-12
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-iue and nep-mfd
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:69506

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