Group versus Individual Liability: Long Term Evidence from Philippine Microcredit Lending Groups

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Group versus Individual Liability: Long Term Evidence from Philippine Microcredit Lending Groups

Author Info

Xavier Giné () (World Bank)
Dean Karlan () (Economic Growth Center, Yale University)

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Abstract

Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The first removed group liability from pre-existing groups and the second randomly assigned villages to either group or individual liability loans. In both, groups still held weekly meetings. We find no increase in default and larger groups after three years in pre-existing areas, and no change in default but fewer groups created after two years in the expansion areas.

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Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 970.

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Length: 36 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:egc:wpaper:970

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Find related papers by JEL classification:
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-07-03 (All new papers)
NEP-MFD-2009-07-03 (Microfinance)
NEP-SOC-2009-07-03 (Social Norms & Social Capital)

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This page was last updated on 2009-10-29.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.