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Microfinance Group Processes and Crises: Responses to Economic and Psychological Threats

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  • Anjana Dube
  • Rajalaxmi Kamath

Abstract

We examine micro-finance institutions (MFI) group processes simulating potential default by members, often the tipping point of crises. Using structural equation methods to develop measurement models and experimental methodology to test causal effects of economic and psychological threats we effectively capture the risks perceived by individual borrowers. We defined these threats in terms of a given financial loss and reputation loss. The results show that members make the subtle distinction between different types of peer pressure and joint liability. We also show that psychological threats perceived by borrowers are key to understanding MFI group processes, especially as triggers to a repayment crisis.

Suggested Citation

  • Anjana Dube & Rajalaxmi Kamath, 2019. "Microfinance Group Processes and Crises: Responses to Economic and Psychological Threats," Journal of Development Studies, Taylor & Francis Journals, vol. 55(10), pages 2273-2285, October.
    • Handle: RePEc:taf:jdevst:v:55:y:2019:i:10:p:2273-2285
    DOI: 10.1080/00220388.2018.1539475
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    Cited by:

    1. Maria Patricia Durango‐Gutiérrez & Juan Lara‐Rubio & Andrés Navarro‐Galera, 2023. "Analysis of default risk in microfinance institutions under the Basel III framework," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1261-1278, April.

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