Group-lending with sequential financing, contingent renewal and social capital

Prabal Roy Chowdhury ()
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Prabal Roy Chowdhury: Indian Statistical Institute, New Delhi

Discussion Papers from Indian Statistical Institute, Delhi

Abstract: This paper focuses on the dynamic aspects of group-lending, in particular sequential financing and contingent renewal. We examine the encacy of these two schemes in harnessing social capital. We find that, for the appropriate parameter configurations, there is homogenous group-formation so that the lender can ascertain the identity of a group without lending to all its members, thus screening out bad borrowers partially. Moreover, under certain parameter configurations, negative assortative matching occurs as a robust phenomenon.

Keywords: Group-lending; sequential financing; contingent renewal; social capital; assortative matching (search for similar items in EconPapers)
JEL-codes: G2 O1 O2 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-02
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