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Determinants of Loan Repayment: Experience from Indian Microcredit Programme

Author

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  • Ramu Maurya

    (Govind Ballabh Pant Social Science Institute, Allahabad, India.)

Abstract

Purpose: We provide an empirical analysis of the impact of monitoring within group based lending programmes on moral hazard behavior of its participants. Methodology: Based on the data from an extensive questionnaire held in Uttar Pradesh, India among 200 participants. Findings: The study finds new information that agent who is outsider of the group, it may be credit officer or other who nurtured and form the group, may be an emergent determinant of loan repayment. We find support for the fact that monitoring by the credit officer do help to reduce moral hazard behavior of group member and improve the repayment of loan. This study supports the emerging BCs model in India and in the world level. Recommendations: The main idea is that it reduces the marginal cost of monitoring and group conflict emerged by peer monitoring within group.

Suggested Citation

  • Ramu Maurya, 2015. "Determinants of Loan Repayment: Experience from Indian Microcredit Programme," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(10), pages 489-498, October.
    • Handle: RePEc:ijr:journl:v:3:y:2015:i:10:p:489-498
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    References listed on IDEAS

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    1. Paxton, Julia & Graham, Douglas & Thraen, Cameron, 2000. "Modeling Group Loan Repayment Behavior: New Insights from Burkina Faso," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 639-655, April.
    2. Zeller, Manfred, 1998. "Determinants of Repayment Performance in Credit Groups: The Role of Program Design, Intragroup Risk Pooling, and Social Cohesion," Economic Development and Cultural Change, University of Chicago Press, vol. 46(3), pages 599-620, April.
    3. DeanS. Karlan, 2007. "Social connections and group banking," Economic Journal, Royal Economic Society, vol. 117(517), pages 52-84, February.
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    5. Mark Wenner, 1995. "Group credit: A means to improve information transfer and loan repayment performance," Journal of Development Studies, Taylor & Francis Journals, vol. 32(2), pages 263-281.
    6. Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," The World Bank Economic Review, World Bank, vol. 4(3), pages 351-366, September.
    7. Wydick, Bruce, 1999. "Can Social Cohesion Be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala," Economic Journal, Royal Economic Society, vol. 109(457), pages 463-475, July.
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    More about this item

    Keywords

    Group Lending; Monitoring cost; Moral Hazard; Peer monitoring; Repayment;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H - Public Economics
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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