New Economics Papers
on Microfinance
Issue of 2006‒11‒12
two papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Determinants of Moral Hazard in Microfinance: Empirical Evidence from Joint Liability Lending Programs in Malawi By Simtowe, Franklin; Zeller, Manfred
  2. Microfinanzas: Un análisis de experiencias y alternativas de regulacion By Delfiner, Miguel; Pailhé, Cristina; Perón, Silvana

  1. By: Simtowe, Franklin; Zeller, Manfred
    Abstract: Moral hazard is widely reported as a problem in credit and insurance markets, mainly arising from information asymmetry. Although theorists have attempted to explain how group lending with joint liability can be an important tool for mitigating moral hazard among the poor, empirical studies are rare and sometimes give mixed results. In Malawi, for example, although, group lending with joint liability has been practiced for nearly four decades, the unwillingness to repay loans remains the single major cause of default. This paper examines the extent of occurrence of moral hazard and investigates its determinants of occurrence among joint liability lending programs from Malawi, using group level data from 99 farm and non-farm credit groups. Results reveal that peer selection, peer monitoring, peer pressure, dynamic incentives and variables capturing the extent of matching problems explain most of the variation in the incidence of moral hazard among credit groups. The implications are that joint liability lending institutions will continue to rely on social cohesion and dynamic incentives as a means to enhancing their performance which has a direct implication on their outreach, impact and sustainability.
    Keywords: moral hazard; joint liability; dynamic incentives; group lending; Malawi
    JEL: M21 M20
    Date: 2006–10–12
  2. By: Delfiner, Miguel; Pailhé, Cristina; Perón, Silvana
    Abstract: During last years there has been an increasing interest about the study of microfinance phenomena as long as the activity has been developing in several countries. There has been an important literature body regarding the different topics related to this theme. This paper focuses on the analysis of experiences of microfinance institutions (MFI) in different countries and the different regulatory approaches suggested for MFI, with the aim of reaching policy conclusions.
    Keywords: Microfinance; experiencies; prudential regulation
    JEL: G21
    Date: 2006–04–02

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