Asymmetric group loans, non-assortative matching and adverse selection

Shubhashis Gangopadhyay and Robert Lensink

Economics Letters, 2014, vol. 124, issue 2, 185-187

Abstract: This paper shows that an asymmetric group debt contract, where one borrower co-signs for another, but not vice versa, leads to heterogeneous matching. The analysis suggests that micro finance organizations can achieve the first best by offering asymmetric group contracts.

Keywords: Cosigning; Group lending; Joint liability; Asymmetry of information; Credit rationing; Micro finance (search for similar items in EconPapers)
JEL-codes: D8 G2 O1 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:124:y:2014:i:2:p:185-187

DOI: 10.1016/j.econlet.2014.05.010

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