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Determinants of repayment performance in Indian micro-credit groups

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  • Deininger, Klaus
  • Liu, Yanyan

Abstract

Despite their potential importance and ease of modification, impacts of monitoring and loan recovery arrangements on micro-credit groups'repayment performance have rarely been studied. Data on 3,350 expired group loans in 300 Indian villages highlight that regular monitoring and audits, high repayment frequency, consumption smoothing support through rice credit, and having group savings deposited with the lender all significantly increase repayment rates. Estimated magnitudes of their effects vastly exceed those of members'socio-economic characteristics. Significantly lower repayment on loans originating in externally provided grant resources suggests that stringent monitoring will be essential for these to have a sustainable impact.

Suggested Citation

  • Deininger, Klaus & Liu, Yanyan, 2009. "Determinants of repayment performance in Indian micro-credit groups," Policy Research Working Paper Series 4885, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4885
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    References listed on IDEAS

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    Cited by:

    1. Sofia Pereira & Paulo Mourao, 2012. "Why does the microcredit borrowing rate differ across countries? A cross‐country study," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 39(8), pages 536-550, June.
    2. Peter Simmons & Nongnuch Tantisantiwong, 2018. "Evaluation of Individual and Group Lending under Asymmetric information," Discussion Papers 18/01, Department of Economics, University of York.
    3. Disha Bhanot & Varadraj Bapat, 2019. "Contributory factors towards sustainability of bank-linked self-help groups in India," Asia-Pacific Sustainable Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 26(2), pages 25-55, December.
    4. Emily Kawira & Richard Kiai & Esther Maina, 2020. "Influence of micro economic factors on financial sustainability of informal finance groups in Kiharu constituency-Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(1), pages 88-93, January.
    5. P Simmons (York) & N Tantisantiwong (Southampton), 2014. "Default and Risk Premia in Microfinance Group Lending," Discussion Papers 14/28, Department of Economics, University of York.

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    Keywords

    Access to Finance; Debt Markets; Bankruptcy and Resolution of Financial Distress; Strategic Debt Management;
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