Joint-liability with endogenously asymmetric group loan contracts

Carli, Francesco; Uras, Burak

doi:10.1016/j.jdeveco.2017.03.003

Cited by 8 publications

(8 citation statements)

References 26 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

Section: 1the Provision Of Microfinancementioning

confidence: 99%

“…The group-based lending model is often used in environments with weak institutions and no formal collateral to secure loans (Carli & Uras, 2017;Milanov et al, 2015). Group lending purports to transfer the screening, monitoring, and enforcement of loans to the collective of borrowers (Carli & Uras, 2017). The underlying logic behind the group lending model is that individuals within a group can be considered not eligible to get microloans but the group, as a whole, is creditworthy (Baland, Rohini & Zaki, 2014;Haldar & Stiglitz, 2016).…”

Section: 1the Provision Of Microfinancementioning

confidence: 99%

See 1 more Smart Citation

Trust-Building Mechanisms in Group-Based Microfinance: A Cameroonian Perspective

Ojöng

Simba

2018

Forum for Social Economics

View full text Add to dashboard Cite

While trust is critical to microlending groups, much less is known about the vital factors and mechanisms that foster its emergence in microlending groups. This paper examines the practices of trust building and use in microlending groups. The results suggest that trust is produced and developed in microlending groups through a combination of calculative, prediction, intentionality, capability and transference mechanisms. These mechanisms are not mutually exclusive but act together to build trust. Though trust has general characteristics, whether and how it is formed and developed in microlending groups depends on contextspecific factors such as informal debt relations. Trust among group members is bolstered by multiplex relations of social events, neighbourhood, and friendship. The paper suggests that the unbanked population has a rich informal credit history.

show abstract

Section: 1the Provision Of Microfinancementioning

confidence: 99%

Section: 1the Provision Of Microfinancementioning

confidence: 99%

Trust-Building Mechanisms in Group-Based Microfinance: A Cameroonian Perspective

Ojöng

Simba

2018

Forum for Social Economics

View full text Add to dashboard Cite

show abstract

“…Under these four assumptions, the optimal contract has two important features (Proposition 5.4 and Lemmas 5.5 and 5.6 in Carli and Uras, 2017). First, it exhibits joint liability, i.e., R HL 1 > R HH 1 , R LH 2 > R HH 2 .…”

Section: Theoretical Backgroundmentioning

confidence: 99%

“…The model of Carli and Uras (2017) assumes there are three agents in the economic environment: an MFI and two identical borrowers. Each borrower has access to a set of mutually exclusive investment projects, namely a good project and a bad project.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

See 1 more Smart Citation

Asymmetric Group Loan Contracts: Experimental Evidence

Carli

Suetens²,

Uras³

et al. 2021

SSRN Journal

Self Cite

View full text Add to dashboard Cite

We design an experiment to study the role of (a)symmetry in the context of group lending with joint liability. The performance of joint-liability contracts crucially hinges on borrowers engaging in peer monitoring. We find that asymmetric contracts, in which monitoring is a dominant strategy for one borrower, increase the monitoring rate, and thus the repayment rate and performance. Moreover, asymmetric contracting also increases expected profits of the lending institution. Overall, our results suggest that asymmetric joint-liability contracts are worth considering as part of a policy to maintain financial stability.

show abstract