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(1999). A lending mechanism which allows a group of individuals - often called a solidarity group to provide collateral or loan guarantee through a group repayment pledge. EndNote You are using a new version of the IGI Global website. This implies that each individual within the groups can be held liable for others’ loans, each individual can be held responsible for outstanding loans. Does Group Liability Matter?’, Policy Research Working Paper 6204, Development Research Group, The World BankLabie, M., Laureti, C., & Szafarz, A. ‘Flexible Products in Microfinance: Overcoming the Demand-Supply Mismatch’, Université Libre de Bruxelles CEB Working Paper 13–044.Labie, M., Méon, P.M., Mersland, R., & Szafarz, A. To date, more than $17 billion has been borrowed on microlending site Prosper and more than $50 billion through Lending Club. According to this report, group lending in microfinance is broken down in two major categories: solidarity groups (Grameen Bank models and models used in Latin America) and community-based organizations (community managed loan funds and village savings and loan associations). Microfinance through group lending is acting as a screening device; the joint liability mechanism creates incentives for internal monitoring. As MFIs has to deliver collateral-free loans, group methodologies help in creating social collateral (peer pressure) that can effectively substitute physical collateral. (2012). Group lending with joint liability is seen as an effective instrument to circumvent information asymmetries because it incentivizes group members to use their social ties to screen, monitor, and enforce loan repayment on their peers. Microfinance. Reference Manager Investopedia requires writers to use primary sources to support their work. Because these loans are not typically backed by any sort of InfoSci-Knowledge Solutions Databases IGI Global is now offering a new collection of InfoSci-Knowledge Solutions databases, which allow institutions to affordably acquire a diverse, rich collection of peer-reviewed e-books and scholarly e-journals. The incentive to repay the loan is based on peer pressure, if one group member defaults, the other group members make up the payment amount. ‘Building Social Capital through Microfinance’, HKS Faculty Research Working Paper 16018Ghatak, M. & Guinnane, T.W. ‘Determinants of Successful Group Loan Repayment: An Application to Burkina Faso’, Doctoral Dissertation, Ohio State UniversityPutnam, R.D. This study seeks to examine the relationship between group lending and loans performance in micro-finance institutions in Kenya, with a focus on KWFT. (1996). ‘Essays on Microfinance in Latin America’, PhD Thesis, Wageningen UniversitySharma, M. & Zeller, M. (1997). "What's up with microfinance interest rates?" ‘Does the Group Leader Matter? The second purpose is to lend to individuals in developed countries who may have Microfinance group lending with joint liability allows asset-poor individuals to replace . This process is experimental and the keywords may be updated as the learning algorithm improves. & Karlan, D. (2009). Production and hosting by Elsevier B.V.ScienceDirect ® is a registered trademark of Elsevier B.V. ‘Determinants of Repayment Performance in Credit Groups: The Role of Program Design, Intragroup Risk Pooling, and Social Cohesion’, © Luminita Postelnicu, Niels Hermes, and Ariane Szafarz 2014 To cosign is to sign jointly with a borrower on a loan to help a borrower obtain a loan or receive better terms on the loan. Zotero People who wish to put their savings to use by lending and those who seek to borrow can find each other online and transact.
(1999). In B. Armendariz and M. Labie (Eds) Hermes, N., Lensink, R., & Mehrteab, H.T. Group micro-lending has been used successfully in some parts of the world to expand the reach of microcredit programs. Group lending with joint liability is seen as an effective instrument to circumvent information asymmetries because it incentivizes group members to use their social ties to screen, monitor, and enforce loan repayment on their peers. These keywords were added by machine and not by the authors.
‘Repayment Performance in Group Lending: Evidence from Jordan’, Al-Azzam, M. & Mimouni, K. (2012). ‘Kin Groups and Reciprocity: A Model of Credit Transactions in Ghana’, Levin, D.Z. The ultimate purpose of group lending methodology in microfinance is to provide timely and continuous credit to the members. Such individual loans would fetch higher returns in form of interest for MFI and boost their outreach, reduce delinquency, and enhance self-sufficiency.Peer review under responsibility of Africagrowth Institute.We use cookies to help provide and enhance our service and tailor content and ads.