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Group-lending with sequential financing, contingent renewal and social capital

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  • Prabal Roy Chowdhury

    (Indian Statistical Institute, New Delhi)

Abstract

This paper focuses on the dynamic aspects of group-lending, in particular sequential financing and contingent renewal. We examine the encacy of these two schemes in harnessing social capital. We find that, for the appropriate parameter configurations, there is homogenous group-formation so that the lender can ascertain the identity of a group without lending to all its members, thus screening out bad borrowers partially. Moreover, under certain parameter configurations, negative assortative matching occurs as a robust phenomenon.

Suggested Citation

  • Prabal Roy Chowdhury, 2006. "Group-lending with sequential financing, contingent renewal and social capital," Discussion Papers 06-01, Indian Statistical Institute, Delhi.
    • Handle: RePEc:alo:isipdp:06-01
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    References listed on IDEAS

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    More about this item

    Keywords

    Group-lending; sequential financing; contingent renewal; social capital; assortative matching;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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