Is it better to be mixed in group lending?

Reito, Francesco (2016): Is it better to be mixed in group lending?

Abstract

This paper shows that, in a group-lending environment characterized by positive assortative matching, a microfinance institution can achieve a Pareto improvement by promoting negative matching among borrowers. Some new implications are: i) borrowers may be better off under mixed groups; ii) a heterogeneous group lending equilibrium is possible even when individual or homogeneous group equilibria do not exist.

• Item Type: MPRA Paper
• Language: English
• Keywords: joint liability lending; assortative matching; screening
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development

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