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Determinants of repayment performance in Indian micro-credit groups (English)

Despite their potential importance and ease of modification, impacts of monitoring and loan recovery arrangements on micro-credit groups' repayment performance have rarely been studied. Data on 3,350 expired group loans in 300 Indian villages highlight that regular monitoring and audits, high repayment frequency, consumption smoothing support through rice credit, and having group savings deposited with the lender all significantly increase repayment rates. Estimated magnitudes of their effects vastly exceed those of members' socio-economic characteristics. Significantly lower repayment on loans originating in externally provided grant resources suggests that stringent monitoring will be essential for these to have a sustainable impact.


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    Deininger, Klaus Liu, Yanyan

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    Policy Research Working Paper

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    South Asia,

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    Determinants of repayment performance in Indian micro-credit groups

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    loan recovery;repayment performance;full repayment;consumption credit;standard normal distribution;case of default;repayment incentive;marketing service;commercial bank loan;credit information system;development research group;annual interest rate;loans from bank;amount of loan;access to information;credit market imperfection;rural financial market;community investment fund;maximum likelihood estimation;estimation result;poor rural woman;repayment rate;explanatory variable;Public Goods;summary statistic;financial affair;loan characteristic;credit group;regression results;regular monitoring;random number;random error;cultural change;savings deposit;negative coefficient;cross-country study;loan repayment;risk pool;output market;social cohesion;microfinance institution;smooth consumption;adverse selection;internal saving;individual loan;cash collateral;credit worthiness;sample mean;village organizations;local development;consumption smoothing;decentralized governance;policy relevance;peer monitoring;joint account;moral hazard;credit cooperatives;credit agreement;joint liability;estimation method;loan size;self-help group;credit constraint;social issue;social collateral;world development;



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Deininger, Klaus Liu, Yanyan

Determinants of repayment performance in Indian micro-credit groups (English). Policy Research working paper ; no. WPS 4885 Washington, D.C. : World Bank Group.