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Vigenina, Denitsa
Kritikos, Alexander S.
Year of Publication: 
Series/Report no.: 
Working Paper Series No. 2005,10
We analyze the incentive mechanism of individual micro-lending contracts and we compare its key factors with those of joint-liability loan contracts. Using our data set, we firstly show that in the individual contract there are three elements, the demand for non-conventional collateral, a screening procedure which combines new with traditional elements, and dynamic incentives in combination with the termination threat in case of default, which ensure high repayment rates of up to 100%. We further show that the joint-liability approach may lead to similar repayment rates, however based on a different incentive system. We reveal that the target group which can be efficiently served by either one of the two mechanisms is different.
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Working Paper

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