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Liability structure in small-scale finance : evidence from a natural experimen (Inglês)

Microfinance, the provision of small individual and business loans, has witnessed dramatic growth, reaching over 150 million borrowers worldwide. Much of its success has been attributed to overcoming the challenges of information asymmetries in uncollateralized lending. Yet, very little is known about the optimal contract structure of such loans -- there is substantial variation across lenders, even within a particular setting. This paper exploits a plausibly exogenous change in the liability structure offered by a microfinance program in India, which shifted from individual to group liability lending. The analysis finds compelling evidence that contract structure matters: for the same borrower, required monthly loan installments are 6 percent less likely to be missed under the group liability setting, relative to individual liability. In addition, compulsory savings deposits are 19 percent less likely to be missed under group liability contracts.


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    Carpena, Fenella Cole, Shawn Shapiro, Jeremy Zia, Bilal

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    Documento de trabalho sobre pesquisa de políticas

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    Regiões Mundiais,

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    Liability structure in small-scale finance : evidence from a natural experimen

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    individual liability;access to financial service;increase in interest rate;small and medium enterprise;change in liability;event of default;journal of finance;information asymmetry problems;initial public offering;global financial market;negative incentive effect;insurance in village;joint liability clause;department of economics;difference in outcomes;simple regression framework;development research group;provision of credit;persistent income inequality;investments in education;compulsory saving;savings account;loan repayment;liability contract;liability structure;standard deviation;repayment rate;contract structure;peer monitoring;loan client;microfinance program;loan contract;compulsory deposit;software system;individual level;standard error;fixed effect;monthly installment;point estimate;social tie;repayment incentive;moral hazard;individual loan;default rate;loan applicant;repayment discipline;loan data;loan product;summary statistic;adverse selection;financial dependence;social sanctions;empirical literature;field experiment;outstanding loan;optimal contract;natural experiment;cross-sectional data;minimum balance;microfinance service;credit cooperatives;savings group;loan portfolio;credit market;voluntary saving;empirical evidence;credit program;regression coefficient;Economic Studies;empirical study;economic study;slum community;development study;social capital;individual characteristic;explanatory variable;guarantor requirement;micro-credit lending;borrower performance;loan origination;sample selection;robustness check;job placement;aggregate deposit;savings deposit;maturity date;partner institution;panel data;investment choice;risk sharing;information transfer;banking market;social collateral;market failure;banking service;legal constraint;Political Economy;risk taking;occupational choice;insurance mechanism;credit agreement;social cohesion;borrower welfare;repayment performance;empirical analysis;world development;enforcement problem;microfinance practitioner;deadweight loss;harsh punishment;high probability;policy shift;microfinance client;monthly data;project selection;lending institution;Cash flow;project approval;monitoring mechanism;savings client;savings portfolio;institutional weakness;banking sector;microfinance organization;urban poor;loan term;monitoring cost;cooperative societies;collateral substitute;liability mechanism;financial habit;causal impact;loan performance;credible evidence;repayment schedule;asset growth;asset creation;adverse shock;transaction cost;working capital;policy perspective;low-income household;unmet demand;productive opportunities;monitoring effort;business loan;savings product;Uncollateralized Lending;substantial variation;financial buffer;capital accumulation;savings cooperative;social function;debt repayment;present evidence;delinquency rate;theoretical model;lending strategy;household expenditure;collateral effect;microfinance institution;peer group;quality measure;risky borrower;safe investment;causal effect;borrower default;lending activities;research effort;mutual agreement;savings service;sole responsibility;interest due;branch managers;commercial bank;research assistance;



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