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Loan Performance of Group-Based Microcredit Programs in the United States

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  • Chikan Richard Hung

Abstract

Peer group lending programs in the United States adapt methodologies first used in developing countries and apply them domestically to benefit low-income communities. This article investigates the effects of context, program design, and staff as well as peer group actions on the loan performance of such programs in the United States. Based on surveys of programs across the country, loan delinquency is primarily a function of context, especially the credit risk of borrowers and time. However, evidence suggests that the payoff structure and peer group actions have discouraged some loan default. Peer group members must be persistently more vigilant than pro- gram staff members throughout the process to ensure loan repayment within the group. Expanding the clientele to the working poor in small towns and rural areas rather than focusing on welfare recipients in big cities may ensure greater financial viability of these programs in the United States.

Suggested Citation

  • Chikan Richard Hung, 2003. "Loan Performance of Group-Based Microcredit Programs in the United States," Economic Development Quarterly, , vol. 17(4), pages 382-395, November.
    • Handle: RePEc:sae:ecdequ:v:17:y:2003:i:4:p:382-395
    DOI: 10.1177/0891242403255364
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    1. Chaves, Rodrigo A. & Gonzalez-Vega, Claudio, 1996. "The design of successful rural financial intermediaries: Evidence from Indonesia," World Development, Elsevier, vol. 24(1), pages 65-78, January.
    2. Jain, Pankaj S., 1996. "Managing credit for the rural poor: Lessons from the Grameen Bank," World Development, Elsevier, vol. 24(1), pages 79-89, January.
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    Cited by:

    1. Jolly, Robert W. & Koppenhaver, Gary D. & Roe, Joshua D., 2004. "Growth of Large-Scale Credit Unions in Iowa: Implications for Public Policy," Working Papers 18209, Iowa State University, Department of Economics.

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