Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/59157
Authors: 
Giné, Xavier
Karlan, Dean
Year of Publication: 
2009
Series/Report no.: 
Center Discussion Paper, Economic Growth Center 970
Abstract: 
Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The first removed group liability from pre-existing groups and the second randomly assigned villages to either group or individual liability loans. In both, groups still held weekly meetings. We find no increase in default and larger groups after three years in preexisting areas, and no change in default but fewer groups created after two years in the expansion areas.
Subjects: 
microfinance
group lending
group liability
joint liability
social capital
microenterprises
informal economies
access to finance
JEL: 
C93
D71
D82
D91
G21
O12
O16
O17
Document Type: 
Working Paper

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