Determinants of Moral hazard in Microfinance: Empirical Evidence from Joint Liability Lending Schemes in Malawi

Franklin Simtowe, Manfred Zeller and Alexander Phiri

No 25287, 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia from International Association of Agricultural Economists

Abstract: Moral hazard is widely reported as a problem in credit and insurance markets, mainly arising from information asymmetry. Although theorists have attempted to explain the success of Joint Liability Lending (JLL) schemes in mitigating moral hazard, empirical studies are rare. This paper investigates the determinants of moral hazard among JLL schemes from Malawi, using group level data from 99 farm and non-farm credit groups. Results reveal that peer selection, peer monitoring, peer pressure, dynamic incentives and variables capturing the extent of matching problems explain most of the variation in the incidence of moral hazard among credit groups. The implications are that Joint Liability Lending institutions will continue to rely on social cohesion and dynamic incentives as a means to enhancing their performance which has a direct implication on their outreach, impact and sustainability.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 17
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://ageconsearch.umn.edu/record/25287/files/pp062756.pdf (application/pdf)

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:ags:iaae06:25287

DOI: 10.22004/ag.econ.25287

Access Statistics for this paper

More papers in 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia from International Association of Agricultural Economists Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search (aesearch@umn.edu).