| By: |
Attanasio, Orazio;
Augsburg, Britta;
de Haas, Ralph;
Fitzsimons, Emla;
Harmgart, Heike |
| Abstract: |
Although microfinance institutions across the world are moving from group
lending towards individual lending, this strategic shift is not substantiated
by sufficient empirical evidence on the impact of both types of lending on
borrowers. We present such evidence from a randomised field experiment in
rural Mongolia. We find a positive impact of access to group loans on food
consumption and entrepreneurship. Among households that were offered group
loans the likelihood of owning an enterprise increases by 10 per cent more
than in control villages. Enterprise profits increase over time as well,
particularly for the less-educated. For individual lending on the other hand,
we detect no significant increase in consumption or enterprise ownership.
These results are in line with theories that stress the disciplining effect of
group lending: joint liability may deter borrowers from using loans for
non-investment purposes. Our results on informal transfers are consistent with
this hypothesis. Borrowers in group-lending villages are less likely to make
informal transfers to families and friends while borrowers in
individual-lending villages are more likely to do so. We find no significant
difference in repayment rates between the two lending programmes, neither of
which en-tailed weekly repayment meetings. -- |
| Keywords: |
group lending,poverty,access to finance,randomised field experiment |
| JEL: |
O16 G21 D21 I32 |
| Date: |
2014 |
| URL: |
http://d.repec.org/n?u=RePEc:zbw:wzbeoc:spii2014303&r=mfd |