Borrowers’ Participation in Group Borrowing

Tutlani, Ankur (2016): Borrowers’ Participation in Group Borrowing.

Abstract

Borrowers’ participation in MFI group lending credit market is not insured because of the alternative sources of credit available. The question arises what is the ideal MFI interest rate to ensure borrowers’ participation which at the same time being financially viable for MFI. The paper attempts to answer this question and analyzes the borrowers’ trade-off of borrowing from MFI or from moneylender (ML). Results show that borrowers may find comparative advantage in borrowing individually from ML as compared to borrowing in a group from MFI if the transaction cost burden is high and their credit requirement is low

• Item Type: MPRA Paper
• Language: English
• Keywords: Microfinance, Group lending, Informal finance, Transaction cost, Effective cost
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements

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