The Effects of Monitoring Activities on Loan Defaults in Group-Based Lending Program: Evidence from Vietnam

Tran Ba-Tri, Loc Dong Truong (), H. Swint Friday and Tien Phat Pham
Additional contact information
Loc Dong Truong: School of Economics, Can Tho University, Can Tho City 94115, Vietnam
H. Swint Friday: RELLIS Campus, Texas A&M University, Bryan, TX 77807, USA
Tien Phat Pham: School of Economics, Can Tho University, Can Tho City 94115, Vietnam

JRFM, 2024, vol. 17, issue 8, 1-16

Abstract: The aim of this study is to investigate the impact of delegated monitoring by a group leader and peer monitoring by group members on loan defaults in a group-based lending program in Vietnam. The data used in the study were collected from a questionnaire survey of 675 participants involved in a group-based lending program conducted from August to October 2022 in the Mekong River Delta, Vietnam. This group-based lending program employs a unique monitoring system that involves hiring the group leader to supervise the group and encouraging group members to monitor each other. The empirical findings derived from the Probit model indicated that delegated monitoring significantly reduces loan defaults, but there was no evidence supporting the effectiveness of peer monitoring within the group. Additionally, under the delegated monitoring scheme, commissions and group size plays an important role in decreasing loan defaults. The implication of the findings is that the Vietnam Bank for Social Policies (VBSP) could maintain large group sizes to provide incentives for group leaders through commissions to enhance repayment rates.

Keywords: delegated monitoring; group lending; loan defaults; peer monitoring; Vietnam (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/17/8/357/pdf (application/pdf)
https://www.mdpi.com/1911-8074/17/8/357/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:17:y:2024:i:8:p:357-:d:1455998

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().