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GROUP LENDING WITH HETEROGENEOUS TYPES

Li Gan, Manuel Hernandez and Yanyan Liu

Economic Inquiry, 2018, vol. 56, issue 2, 895-913

Abstract: This paper proposes and implements a mixture structure to model repayment behavior in group lending with unobserved group heterogeneity. We discuss the model properties and identification and estimate the model using a rich dataset from a group lending program in India. The estimation results support the existence of two different group types: “responsible” and “irresponsible” groups. We find that the effects of the factors driving repayment behavior differ across types. The model also shows a higher predictive performance than standard probabilistic models, particularly in the identification of potential defaulters. We provide evidence supporting the robustness of our estimations. (JEL O16, C35)

Date: 2018
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https://doi.org/10.1111/ecin.12541

Related works:
Working Paper: Group lending with heterogeneous types (2013) Downloads
Working Paper: Group Lending with Heterogeneous Types (2013) Downloads
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