Group versus Individual Liability : A Field Experiment in the Philippines
Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which started with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group lending claims to improve repayment rates and lower transactio...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2006/09/7063025/group-versus-individual-liability-field-experiment-philippines http://hdl.handle.net/10986/9268 |
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okr-10986-92682021-04-23T14:02:41Z Group versus Individual Liability : A Field Experiment in the Philippines Giné, Xavier Karlan, Dean S. BANKS CHECKS CLAUSE DEPOSITS FINANCIAL MARKETS INDIVIDUAL ACCOUNTS INSTALLMENT INSTALLMENTS LIABILITY LIABILITY CLAIMS LIABILITY RULE MICROFINANCE MORAL HAZARD MUTUAL AGREEMENT NETWORKS NEW ENTRANTS PENALTIES PERSONAL SAVINGS PROFITABILITY PROTOCOLS SAFETY NETS SAVINGS ACCOUNTS SAVINGS BEHAVIOR TRANSACTION COSTS Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which started with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group lending claims to improve repayment rates and lower transaction costs when lending to the poor by providing incentives for peers to screen, monitor, and enforce each other's loans. However, some argue that group liability creates excessive pressure and discourages good clients from borrowing, jeopardizing both growth and sustainability. Therefore, it remains unclear whether group liability improves the lender s overall profitability and the poor's access to financial markets. The authors worked with a bank in the Philippines to conduct a field experiment to examine these issues. They randomly assigned half of the 169 pre-existing group liability 'centers' of approximately twenty women to individual-liability centers (treatment) and kept the other half as-is with group liability (control). We find that the conversion to individual liability does not affect the repayment rate, and leads to higher growth in center size by attracting new clients. 2012-06-26T18:01:23Z 2012-06-26T18:01:23Z 2006-09 http://documents.worldbank.org/curated/en/2006/09/7063025/group-versus-individual-liability-field-experiment-philippines http://hdl.handle.net/10986/9268 English en_US Policy Research Working Paper; No. 4008 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 East Asia and Pacific Southeast Asia Asia Philippines |
| 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 |
BANKS CHECKS CLAUSE DEPOSITS FINANCIAL MARKETS INDIVIDUAL ACCOUNTS INSTALLMENT INSTALLMENTS LIABILITY LIABILITY CLAIMS LIABILITY RULE MICROFINANCE MORAL HAZARD MUTUAL AGREEMENT NETWORKS NEW ENTRANTS PENALTIES PERSONAL SAVINGS PROFITABILITY PROTOCOLS SAFETY NETS SAVINGS ACCOUNTS SAVINGS BEHAVIOR TRANSACTION COSTS |
| spellingShingle |
BANKS CHECKS CLAUSE DEPOSITS FINANCIAL MARKETS INDIVIDUAL ACCOUNTS INSTALLMENT INSTALLMENTS LIABILITY LIABILITY CLAIMS LIABILITY RULE MICROFINANCE MORAL HAZARD MUTUAL AGREEMENT NETWORKS NEW ENTRANTS PENALTIES PERSONAL SAVINGS PROFITABILITY PROTOCOLS SAFETY NETS SAVINGS ACCOUNTS SAVINGS BEHAVIOR TRANSACTION COSTS Giné, Xavier Karlan, Dean S. Group versus Individual Liability : A Field Experiment in the Philippines |
| geographic_facet |
East Asia and Pacific Southeast Asia Asia Philippines |
| relation |
Policy Research Working Paper; No. 4008 |
| description |
Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which started with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group lending claims to improve repayment rates and lower transaction costs when lending to the poor by providing incentives for peers to screen, monitor, and enforce each other's loans. However, some argue that group liability creates excessive pressure and discourages good clients from borrowing, jeopardizing both growth and sustainability. Therefore, it remains unclear whether group liability improves the lender s overall profitability and the poor's access to financial markets. The authors worked with a bank in the Philippines to conduct a field experiment to examine these issues. They randomly assigned half of the 169 pre-existing group liability 'centers' of approximately twenty women to individual-liability centers (treatment) and kept the other half as-is with group liability (control). We find that the conversion to individual liability does not affect the repayment rate, and leads to higher growth in center size by attracting new clients. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Giné, Xavier Karlan, Dean S. |
| author_facet |
Giné, Xavier Karlan, Dean S. |
| author_sort |
Giné, Xavier |
| title |
Group versus Individual Liability : A Field Experiment in the Philippines |
| title_short |
Group versus Individual Liability : A Field Experiment in the Philippines |
| title_full |
Group versus Individual Liability : A Field Experiment in the Philippines |
| title_fullStr |
Group versus Individual Liability : A Field Experiment in the Philippines |
| title_full_unstemmed |
Group versus Individual Liability : A Field Experiment in the Philippines |
| title_sort |
group versus individual liability : a field experiment in the philippines |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2006/09/7063025/group-versus-individual-liability-field-experiment-philippines http://hdl.handle.net/10986/9268 |
| _version_ |
1764406525379477504 |