Grameen Bank Lending : Does Group Liability Matter?
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...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2012/09/16753280/grameen-bank-lending-group-liability-matter http://hdl.handle.net/10986/12058 |
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okr-10986-120582021-04-23T14:02:59Z Grameen Bank Lending : Does Group Liability Matter? Khandker, Shahidur R. 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 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. 2013-01-02T22:35:51Z 2013-01-02T22:35:51Z 2012-09 http://documents.worldbank.org/curated/en/2012/09/16753280/grameen-bank-lending-group-liability-matter http://hdl.handle.net/10986/12058 English en_US Policy Research Working Paper; No. 6204 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research South Asia Bangladesh |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
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 |
| spellingShingle |
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 Khandker, Shahidur R. Grameen Bank Lending : Does Group Liability Matter? |
| geographic_facet |
South Asia Bangladesh |
| relation |
Policy Research Working Paper; No. 6204 |
| description |
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. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Khandker, Shahidur R. |
| author_facet |
Khandker, Shahidur R. |
| author_sort |
Khandker, Shahidur R. |
| title |
Grameen Bank Lending : Does Group Liability Matter? |
| title_short |
Grameen Bank Lending : Does Group Liability Matter? |
| title_full |
Grameen Bank Lending : Does Group Liability Matter? |
| title_fullStr |
Grameen Bank Lending : Does Group Liability Matter? |
| title_full_unstemmed |
Grameen Bank Lending : Does Group Liability Matter? |
| title_sort |
grameen bank lending : does group liability matter? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2012/09/16753280/grameen-bank-lending-group-liability-matter http://hdl.handle.net/10986/12058 |
| _version_ |
1764418837880504320 |