Loan Performance of Group-Based Microcredit Programs in the United States

Chikan Richard Hung

Economic Development Quarterly, 2003, vol. 17, issue 4, 382-395

Abstract: Peer group lending programs in the United States adapt methodologies first used in developing countries and apply them domestically to benefit low-income communities. This article investigates the effects of context, program design, and staff as well as peer group actions on the loan performance of such programs in the United States. Based on surveys of programs across the country, loan delinquency is primarily a function of context, especially the credit risk of borrowers and time. However, evidence suggests that the payoff structure and peer group actions have discouraged some loan default. Peer group members must be persistently more vigilant than pro- gram staff members throughout the process to ensure loan repayment within the group. Expanding the clientele to the working poor in small towns and rural areas rather than focusing on welfare recipients in big cities may ensure greater financial viability of these programs in the United States.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ecdequ:v:17:y:2003:i:4:p:382-395

DOI: 10.1177/0891242403255364

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