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Choice Between Microfinance System Operating on the Basis of Individual Liability Loan Contract or Through Joint Liability Loan Contract

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  • Kundu, Amit

Abstract

In this paper we consider that a representative of a not so affluent rural household has three options. He (she) may join in a microfinance system operating on the basis of individual liability credit contract, or on the basis of joint liability loan contract through forming self-help group or may not participate in any type of microfinance system. This paper establishes that wealthier among the not so affluent rural household prefers to join microfinance system operating on the basis of individual liability loan contract, comparatively less wealthy prefers to join microfinance system operating on the basis of joint liability loan contract and ultra poor is less likely to join any type of microfinance system. This paper establishes that a household with high dependency ratio and higher intra-household decision making power of the head of the women of that household also influences the household to join microfinance system and in both the situations the probability of joining microfinance system operating on the basis of joint liability loan contract is slightly higher. It is also established that microfinance system fails to solve the ageing problem in rural areas because aged persons are less prone to join in any type of microfinance system.

Suggested Citation

  • Kundu, Amit, 2009. "Choice Between Microfinance System Operating on the Basis of Individual Liability Loan Contract or Through Joint Liability Loan Contract," MPRA Paper 14981, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:14981
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    File URL: https://mpra.ub.uni-muenchen.de/28794/1/MPRA_paper_28794.pdf
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    References listed on IDEAS

    as
    1. Xavier Gine & Dean Karlan, 2006. "Group versus Individual Liability: A Field Experiment in the Philippines," Working Papers 940, Economic Growth Center, Yale University.
    2. Lehner, Maria, 2008. "Group versus Individual Lending in Microfinance," Discussion Papers in Economics 7486, University of Munich, Department of Economics.
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    Cited by:

    1. Nivedita T. Dwivedi & Tanya Mishra, 2013. "Impact Of Microcredit Services On Socioeconomic Status Of Women Entrepreneurs," Working papers 2013-9-11, Voice of Research.

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    More about this item

    Keywords

    Microfinance; Individual liability; Joint Liability;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • A10 - General Economics and Teaching - - General Economics - - - General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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