Group lending with correlated project outcomes

Group lending with correlated project outcomes

This paper shows that positive correlation between project outcomes may improve the efficiency of microfinance group lending contracts. ► Microfinance borrowers’ projects are often correlated. ► This is considered to be a problem for group lending. ► We show that this is not necessarily the case. ►...

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Veröffentlicht in:Economics letters 2012-11, Vol.117 (2), p.445-447
Hauptverfasser: Katzur, Tomek, Lensink, Robert
Format: Artikel
Sprache:eng
Schlagworte:
Adverse selection
Contracts
Correlated project outcomes
Correlation analysis
Economic efficiency
Group lending
Microfinance
Projects
Studies
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Zusammenfassung:This paper shows that positive correlation between project outcomes may improve the efficiency of microfinance group lending contracts. ► Microfinance borrowers’ projects are often correlated. ► This is considered to be a problem for group lending. ► We show that this is not necessarily the case. ► Correlation between similar projects may even give a better welfare result.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2012.06.032