Group versus individual liability: Short and long term evidence from Philippine microcredit lending groups

Xavier Giné*, Dean S. Karlan

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

80 Scopus citations

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 short-run or long-run default and larger groups after three years in pre-existing areas, and no change in default but fewer groups created after two years in the expansion areas.

Original languageEnglish (US)
Pages (from-to)65-83
Number of pages19
JournalJournal of Development Economics
Volume107
DOIs
StatePublished - Mar 1 2014

Keywords

  • Access to finance
  • Group lending
  • Group liability
  • Informal economies
  • Joint liability
  • Micro-enterprises
  • Microfinance
  • Social capital

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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