Financial Access Initiative Blog
Many believe that group liability in microcredit improves repayment rates through peer screening, monitoring, and enforcement. But when Dean Karlan and Xavier Giné set out to test this hypothesis, they found no increase in default with individual liability. A new World Bank study provides evidence to the contrary. Nevertheless, although seemingly contradictory, the two studies are actually complementary: together they reveal culture and prior loan experience strongly influence borrowers' monitoring and repayment behavior and are thus key considerations when designing an optimal contract structure. To read more please access Karlan's study here and the World Bank study here.
Sent with Reeder
