Artikel
Group lending, matching patterns, and the mystery of microcredit: Evidence from Thailand
How has the microcredit movement managed to push financial frontiers? Theory shows that if borrowers vary in unobservable risk, then group-based, joint liability contracts price for risk more accurately than individual contracts, provided that borrowers match with others of similar project riskiness (Ghatak (1999, 2000)). This more accurate risk-pricing can attract safer borrowers and rouse an otherwise dormant credit market. We extend the theory to include correlated risk, and show that borrowers will match with partners exposed to similar shocks to lower their chances of facing liability for their partners. We use unique data on Thai microcredit borrowing groups to test for homogeneous matching by project riskiness and type of risk exposure. Evidence supports the theory, in that groups are more homogeneous in riskiness but less diversified in type of risk exposure than they would be under random matching. The results suggest that group lending is improving risk-pricing by embedding a discount for safe borrowers, and can thus explain part of the unprecedented rise in financial intermediation among the world's poor; but that a potential pitfall of voluntary group formation is antidiversification, which points to strategies for lender intervention.
- Language
-
Englisch
- Bibliographic citation
-
Journal: Quantitative Economics ; ISSN: 1759-7331 ; Volume: 11 ; Year: 2020 ; Issue: 2 ; Pages: 713-759 ; New Haven, CT: The Econometric Society
- Classification
-
Wirtschaft
Semiparametric and Nonparametric Methods: General
Econometrics of Games and Auctions
Bargaining Theory; Matching Theory
Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- Subject
-
Microcredit
matching
group lending
group formation
- Event
-
Geistige Schöpfung
- (who)
-
Ahlin, Christian
- Event
-
Veröffentlichung
- (who)
-
The Econometric Society
- (where)
-
New Haven, CT
- (when)
-
2020
- DOI
-
doi:10.3982/QE1115
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Ahlin, Christian
- The Econometric Society
Time of origin
- 2020
Other Objects (12)
Micro-credit and group lending: The collateral effect
Group versus individual liability: Long term evidence from Philippine microcredit lending groups
Microcredit and poverty alleviation: Can microcredit close the deal?
International experience of microcredit
International experience of microcredit
The rationale of bank lending in pre-crisis Thailand
The rationale of bank lending in pre-crisis Thailand
The rationale of bank lending in pre-crisis Thailand
Matching for credit: Identifying information asymmetries in joint-liability lending
On the rationale of bank lending in pre-crisis Thailand
On the Rationale of Bank Lending in Pre-Crisis Thailand
On the rationale of bank lending in pre-crisis Thailand
Micro-credit and group lending: The collateral effect
Group versus individual liability: Long term evidence from Philippine microcredit lending groups
Microcredit and poverty alleviation: Can microcredit close the deal?
International experience of microcredit
International experience of microcredit
The rationale of bank lending in pre-crisis Thailand
The rationale of bank lending in pre-crisis Thailand
The rationale of bank lending in pre-crisis Thailand
Matching for credit: Identifying information asymmetries in joint-liability lending
On the rationale of bank lending in pre-crisis Thailand
On the Rationale of Bank Lending in Pre-Crisis Thailand
On the rationale of bank lending in pre-crisis Thailand
Micro-credit and group lending: The collateral effect
Group versus individual liability: Long term evidence from Philippine microcredit lending groups
Microcredit and poverty alleviation: Can microcredit close the deal?
International experience of microcredit
International experience of microcredit
The rationale of bank lending in pre-crisis Thailand
The rationale of bank lending in pre-crisis Thailand
The rationale of bank lending in pre-crisis Thailand
Matching for credit: Identifying information asymmetries in joint-liability lending
On the rationale of bank lending in pre-crisis Thailand
On the Rationale of Bank Lending in Pre-Crisis Thailand