Munich Personal RePEc Archive

El crédito solidario, el colateral social, y la colusión. Algunos apuntes

Galarza, Francisco (2003): El crédito solidario, el colateral social, y la colusión. Algunos apuntes. Published in: Debate Agrario No. 35 (2003): pp. 105-132.

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In recent years, the literature on group lending has increased considerably, inspired by the successful microfinance experiences in Bangladesh, Bolivia, and other developing countries. A great deal of this literature has emphasized the ability of group lending mechanisms to reduce borrower selection costs, and to increase peer monitoring and enforcement. In terms of enforcement, it is commonly assumed that peers will keep a vigilant eye on the other group members' economic activities. The existence of social ties is also expected to impose additional constraints (and penalties) to opportunistic behavior, thus reducing default rates. This review article takes a critical perspective on the group lending methodology and examines both sides of the story: its beneficial features and its potential limitations.

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