Microfinance Beyond Group Lending

Aghion, Beatriz Armendáriz de; Morduch, Jonathan

doi:10.1111/1468-0351.00049

Cited by 291 publications

(168 citation statements)

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“…While microfinance programs are most widespread in less developed countries they are by no means confined to them. These programs have been introduced in transition economies such as Bosnia and Russia and in developed countries such as Australia, Canada and the US (see Conlin (1999), Armendariz de Aghion and Morduch (2000), Armendariz de Aghion and Morduch (2005) and Fry et al (2008)). Micro-lending is increasingly moving from non-profit towards a profit-making enterprise, with large banks such as Citigroup now backing such loans (Bellman (2006)).…”

Section: Introductionmentioning

confidence: 99%

“…Our paper complements this rapidly growing literature by directly testing some of the theoretical predictions relating to individual and group lending and the cost of monitoring, which is difficult to do in the field. 4 to the cost of lender monitoring, then joint liability dominates. We also document differences in group and individual lending treatments that could be attributed to group-based responsibility and trust.…”

Section: Introductionmentioning

confidence: 99%

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Moral hazard and peer monitoring in a laboratory microfinance experiment

Cason

Gangadharan

Maitra

2012

Journal of Economic Behavior & Organization

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This paper reports the results from a laboratory microfinance experiment of group lending in the presence of moral hazard and (costly) peer monitoring. We compare peer monitoring treatments in which credit is provided to members of the group to individual lending treatments with lender monitoring. We find that if the cost of peer monitoring is lower than the cost of lender monitoring, peer monitoring results in higher loan frequencies, higher monitoring and higher repayment rates compared to lender monitoring. In the absence of monitoring cost differences, however, lending, monitoring and repayment behaviour is mostly similar across group and individual lending schemes. Within group lending, contrary to theoretical predictions, simultaneous and sequential lending rules provide equivalent empirical performance.JEL Classification: G21, C92, O2.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Moral hazard and peer monitoring in a laboratory microfinance experiment

Cason

Gangadharan

Maitra

2012

Journal of Economic Behavior & Organization

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“…Loan sizes are adapted to the borrowers' incomes based on intensive client assessments, relationships are established by carefully increasing loan amounts for good borrowers, and loan products are standardized by offering mainly installment loans (standard loans) with loan repayment starting immediately after loan disbursement. Product standardization is even considered as one of the main reasons for the high repayment rates and, hence, the success of microfinance (Armendáriz de Aghion and Morduch, 2000;Jain and Mansuri, 2003). However, product standardization also has several drawbacks.…”

Section: Introductionmentioning

confidence: 99%

Microfinance Beyond the Standard? Evaluating Adequacy and Performance of Agricultural Microcredit

Weber¹

2013

Microfinance 3.0

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Microfinance was successful in increasing access to credit for micro, small and medium enterprises in developing countries, particularly in urban areas. The offer of installment loans as the standard credit product for new and very small customers has been indentified as one of the keys that enabled microfinance institutions to reach out to formerly unbanked entrepreneurs. However, these standard loans always were considered as inadequate for agricultural entrepreneurs with seasonal production cycles. For this reason, this paper investigates the effects of providing flexible agricultural microfinance loans (flex loans) to farmers as an alternative to standard installment loans. The study was carried out in cooperation with two banks of the AccessHolding Microfinance AG in Tanzania and Madagascar. A mixed-methods approach was applied relying on observations during field visits and in-depth portfolio analyses.Our results reveal that the combination of standard and flex loans enables the investigated microfinance institution to address a wide range of agricultural producers. Based on our results it seems very unlikely that seasonal agricultural producers would have had credit access without flex loans. Standard loans are only adequate to address non-seasonal agricultural producers. We also find that nonseasonal agricultural producers repay their loans with delinquency rates similar or even better than those of non-farmers. For seasonal agricultural producers a redis-* The views expressed in this paper are entirely those of the author and do not necessarily represent those of KfW. The authors are grateful to Access Microfinance Holding AG and LFS Financial Systems GmbH in Berlin, Germany, for the provision of data, in particular Stephan Hödtke and his colleagues from the LFS IT department. Furthermore, we would like to thank all colleagues from AccèsBanque Madagascar for their great support during the field visits in Madagascar and for contributing their expertise; Claudia Schmerler is also acknowledged for her helpful comments.

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“…Our approach is similar 2 to that of social sanctions 1 , since transfers are denied to the borrower in case of misbehavior and are provided by those who are best informed about the borrower's actions. It departs, however, in that the denial of solidarity does not necessarily come from individuals who have been directly damaged by a defaulting borrower.…”

Section: Introductionmentioning

confidence: 99%

Solidarity and Microfinance

Cerasi

Dallapellegrina

2012

SSRN Journal

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In this paper we analyze the role of peer solidarity in fostering productive investments in the context of micro…nance. When there is asymmetric information between lenders and borrowers and loans are not collateralized, borrowers may divert loans towards current consumption rather than investing in production. We assume that solidarity is accorded by a network of individuals close enough to the borrower (peers) so as to share private information about hidden e¤ort in the productive project. The model shows that peer solidarity might have contrasting e¤ects on the e¤ort in the productive investment. On the one hand, since solidarity transfers are contingent on the e¤ort, they increase borrower's incentive to invest. On the other hand, solidarity tranfers decrease the marginal utility of future consumption at the expense of productive investment. The predictions of the model are tested on households enrolled in micro-lending programs who were surveyed in Bangladesh by the World Bank during the period 1991-1992. Empirical …ndings suggest a positive relationship between the …nancial capability of borrowers'solidarity network and the share of loans invested in productive activities.

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Microfinance Beyond Group Lending

Cited by 291 publications

References 10 publications

Moral hazard and peer monitoring in a laboratory microfinance experiment

Moral hazard and peer monitoring in a laboratory microfinance experiment

Microfinance Beyond the Standard? Evaluating Adequacy and Performance of Agricultural Microcredit

Solidarity and Microfinance

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