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Commercialization and the decline of joint liability microcredit

Jonathan de Quidt, Thiemo Fetzer and Maitreesh Ghatak

Journal of Development Economics, 2018, vol. 134, issue C, 209-225

Abstract: Numerous authors point to a decline in joint liability microcredit, and rise in individual liability lending. But empirical evidence is lacking, and there have been no rigorous analyses of possible causes. We first show using the well-known MIX Market dataset that there is evidence for a decline. Second, we show theoretically that commercialization–an increase in competition and a shift from non-profit to for-profit lending (both of which are present in the data)–drives lenders to reduce their use of joint liability loan contracts. Third, we test the model's key predictions, and find support for them in the data.

Keywords: Microfinance; Joint liability; Commercialization; Market structure (search for similar items in EconPapers)
JEL-codes: G21 O12 O16 (search for similar items in EconPapers)
Date: 2018
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