|
on Microfinance |
| By: | Kono, Hisaki |
| Abstract: | Microfinance institutions employ various kinds of incentive schemes but estimating the effect of each scheme is not easy due to endogeneity bias. We conducted field experiments in Vietnam to capture the role of joint liability, monitoring, cross-reporting, social sanctions, communication and group formation in borrowers’ repayment behavior. We find that joint liability contracts cause serious free-riding problems, inducing strategic default and lowering repayment rates. When group members observe each others’ investment returns, participants are more likely to choose strategic default. Even after introducing a cross-reporting system and/or penalties among borrowers, the default rates and the ratios of participants who chose strategic default under joint liability are still higher than those under individual lending. We also find that joint liability lending often failed to induce mutual insurance among borrowers. Those who had been helped or who had repaid a little in the previous round were more likely to default strategically and repay a little again in the current round and those who paid large amounts were always the same individuals. |
| Keywords: | Microfinance, Joint liability, Free-riding, Vietnam |
| JEL: | F15 O14 O30 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper61&r=mfd |
| By: | Shigetomi, Shinichi |
| Abstract: | The importance of organizing local people for development work is widely recognized. Both governmental and non-governmental agencies have implemented various projects that have needed and encouraged collective action by people. Often, however, such projects malfunction after the outside agencies retreat from the project site, suggesting that making organizations is not the same as making a system of making organizations. The latter is essential to make rural organizations self-reliant and sustainable. This paper assumes that such a system exists in local societies and focuses on the capacity of local societies for creating and managing organizations for development. It reveals that (1) such capability differs according to the locality, (2) the difference depends on the structure of the organizations that coordinate people's social relations, and (3) the local administrative bodies define, at least partly, the organizational capability of local societies. We compare two rural societies, one in Thailand and the other in the Philippines, which show clear contrasts in both the form of microfinance organizations and the way of making these organizations. |
| Keywords: | Local organization, Rural society, Rural development, Microfinance, Local administration, Thailand, Philippines |
| JEL: | O18 O53 Q00 Z13 |
| Date: | 2006–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper47&r=mfd |