Group versus individual liability: Short and long term evidence from Philippine microcredit lending groups

Xavier Gine and Dean Karlan

Journal of Development Economics, 2014, vol. 107, issue C, 65-83

Abstract: Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The first removed group liability from pre-existing groups and the second randomly assigned villages to either group or individual liability loans. In both, groups still held weekly meetings. We find no increase in short-run or long-run default and larger groups after three years in pre-existing areas, and no change in default but fewer groups created after two years in the expansion areas.

Keywords: Microfinance; Group lending; Group liability; Joint liability; Social capital; Micro-enterprises; Informal economies; Access to finance (search for similar items in EconPapers)
JEL-codes: C93 D71 D82 D91 G21 O12 O16 O17 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (75)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:107:y:2014:i:c:p:65-83

DOI: 10.1016/j.jdeveco.2013.11.003

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