Key Factors of Joint-Liability Loan Contracts: An Empirical Analysis

Alexander Kritikos and Denitsa Vigenina

No 231, Discussion Papers from European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics

Abstract: We empirically examine the efficacy of various incentives of microlending contracts such as joint-liability or group access to future loans. We find that joint liability induces a group formation of low risk borrowers. Furthermore, the incentive system leads to peer measures between the borrowers, helping the lender to address the moral hazard and enforcement problem. We also demonstrate that the mechanism realizes high repayment rates, if the loan officers fulfill their complementary duties in the screening and enforcement process. Finally, we show that dynamic incentives have to be restricted if the two problems of joint-liability are to be tackled notably.

JEL-codes: D82 G21 O22 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (12)

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Journal Article: Key Factors of Joint‐Liability Loan Contracts: An Empirical Analysis (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:euvwdp:231

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