Grameen Bank Lending : Does Group Liability Matter?
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World Bank, Washington, DC
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Competing theories increasingly support
the positive role of social capital in small loan default
costs of group lending; at the same time, potential group
collusion may increase loan delinquencies. Findings from the
available literature are mixed on the role of the various
attributes of group lending. But past studies suffer from
estimation bias due to the unobserved sorting behavior of
group members and their other attributes. This paper
attempts to resolve that estimation bias by utilizing
longitudinal data from 297 Grameen Bank groups since their
inceptions. A dynamic lagged dependent model with correction
for time-varying heterogeneity of group and individual
behavior is applied to estimate the effect of group
liability in the Grameen Bank. The results suggest that
group liability matters in both loan disbursement and
repayment, with women less of a credit risk than men and
women's groups more homogeneous than men's.
Finally, the benefits of social capital outweigh the costs
of group collusion, especially for women's groups,
thereby reducing overall default rates. The risk-pooling
behavior of diverse men's groups increases men's
repayment behavior. Overall, group lending as practiced by
Grameen Bank appears to increase repayment rates.
Palabras clave
ACCESS TO CREDIT, ADVERSE SELECTION, AGRICULTURE, AMOUNT DUE, AMOUNT OF LOAN, BANK BRANCH, BANK LENDING, BANK POLICY, BOND, BORROWER, BORROWING, BRANCHES, COLLATERAL, COLLUSION, CONSUMER CREDIT, CONTRACTUAL OBLIGATIONS, CREDIT AGREEMENT, CREDIT CONSTRAINT, CREDIT CONTRACTS, CREDIT COOPERATIVE, CREDIT GROUPS, CREDIT MARKET, CREDIT PROGRAMS, CREDIT RISK, CREDIT RISKS, DEFAULT COST, DEFAULT COSTS, DEFAULT RATES, DEFAULTS, DEMAND FOR CREDIT, DEPENDENT, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISBURSEMENT, DISBURSEMENTS, DISECONOMIES OF SCALE, ECONOMETRICS, ECONOMIC CONDITIONS, ECONOMIC DEVELOPMENT, ECONOMIC RESOURCES, EMPLOYMENT, ENDOGENOUS VARIABLES, EQUATIONS, EXPERIMENTAL ECONOMICS, EXTERNALITY, FINANCIAL INSTITUTIONS, GROUP BORROWERS, GROUP CREDIT, GROUP LENDING, GROUP LENDING PROGRAMS, GROUP LOAN, GROUP REPAYMENT, GROUP-LENDING, HOUSEHOLD INCOME, HOUSING, INDEBTED, INDIVIDUAL DEFAULT, INDIVIDUAL LIABILITY, INDIVIDUAL LOAN, INFORMATION ASYMMETRIES, INSTITUTIONAL CREDIT, INSTRUMENT, INSURANCE, INTERNATIONAL BANK, JOINT LIABILITY, LAND ASSETS, LENDER, LENDERS, LEVERAGE, LIABILITY, LOAN AMOUNT, LOAN AMOUNTS, LOAN CONTRACTS, LOAN DEFAULT, LOAN DEFAULT RATE, LOAN DEFAULT RATES, LOAN DEFAULTS, LOAN PERFORMANCE, LOAN RECOVERIES, LOAN RECOVERY, LOAN REPAYMENT, LOAN REPAYMENT RATE, LOAN REPAYMENT RATES, LOAN REPAYMENTS, LOAN SIZE, LOANS TO GROUPS, MARKET FAILURES, MICROCREDIT, MICROCREDIT PROGRAM, MICROFINANCE, MICROFINANCE INSTITUTIONS, MICROFINANCE PROGRAMS, MORAL HAZARD, PEER PRESSURE, PENALTIES, PROBABILITY OF DEFAULT, PUBLIC ADMINISTRATION, RECOVERY RATE, RECOVERY RATES, REPAYMENT, REPAYMENT BEHAVIOR, REPAYMENT HISTORY, REPAYMENT INCENTIVES, REPAYMENT PERFORMANCE, REPAYMENT RATE, REPAYMENT RATES, RISK POOLING, SMALL LOAN, SOCIAL CAPITAL, SOCIAL COLLATERAL, TRANSACTION, TRANSACTION COST