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| Simtowe, Franklin; Zeller, Manfred; Phiri, Alexander. |
| 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... |
| Tipo: Conference Paper or Presentation |
Palavras-chave: Moral hazard; Joint liability; Dynamic incentives; Group lending; Malawi; Financial Economics. |
| Ano: 2006 |
URL: http://purl.umn.edu/25287 |
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| Li, Shanjun; Liu, Yanyan; Deininger, Klaus W.. |
| We quantify the importance of peer effects in group lending by estimating a static game of incomplete information. In our model, group members make their repayment decisions simultaneously based on their household and loan characteristics as well as their expectations on other members’ repayment decisions. Exploiting a rich data set of a microfinance program in India, our estimation results suggest that the likelihood of a member making a full repayment would be 15 percent higher on average if all the other follow members make full repayment compared to the case where none of the other members repay in full. We also find that large inconsistencies exist in the estimated effects of other variables in models that do not incorporate peer effects and control... |
| Tipo: Conference Paper or Presentation |
Palavras-chave: Peer effects; Group lending; Joint liability; Self-help groups in India; International Development. |
| Ano: 2009 |
URL: http://purl.umn.edu/49497 |
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