Is it better to be mixed in group lending? | Zendy

Reito Francesco | Zendy

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Is it better to be mixed in group lending?

Author(s) -

Reito Francesco

Publication year - 2019

Publication title -

review of development economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.531

H-Index - 50

eISSN - 1467-9361

pISSN - 1363-6669

DOI - 10.1111/rode.12549

Subject(s) - microfinance , homogeneous , joint and several liability , economics , group (periodic table) , pareto principle , institution , matching (statistics) , microeconomics , liability , econometrics , monetary economics , finance , mathematics , statistics , operations management , economic growth , chemistry , organic chemistry , combinatorics , tort , political science , law

This paper shows that, in a group‐lending scheme with joint liability, a microfinance institution can achieve a Pareto improvement by promoting negative assortative matching among borrowers. The main results are: (i) borrowers may be better off in heterogeneous groups; and (ii) a heterogeneous group equilibrium is possible when individual or homogeneous group equilibria do not exist.

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