Group Lending and Its Implications in Credit Markets for Poor People

Wörz, Julia (September 1999) Group Lending and Its Implications in Credit Markets for Poor People. Reihe Transformationsökonomie / Transition Economics Series 12

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Abstract or Table of Contents

Abstract: Group lending has proved to be a successful form of lending in credit markets for poor people. In this paper, the policy of the Grameen Bank in Bangladesh is modeled. It is shown that under certain conditions making borrowers jointly liable for their loans can induce repayment even in the absence of formal credit enforcement mechanisms. A distinction is made between ability and willingness to repay. Both aspects crucially depend on the social setting and on the loan size. If social ties are too loose, the social pressure generated by joint liability is not sufficient to induce borrowers to repay. This constraint is more binding in the case of micro-credits.;

Item Type: IHS Series
Keywords: 'Mikrokredite' 'Gruppenkredit' 'Banksicherheit' 'Bangladesch' 'Grameen Bank' 'Micro credit' 'Group-lending' 'Collateral' 'Bangladesh'
Classification Codes (e.g. JEL): D82, G20, O16
Status: Published
Date Deposited: 26 Sep 2014 10:37
Last Modified: 01 Apr 2016 14:11
URI: http://irihs.ihs.ac.at/id/eprint/1203

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