On the Viability of Group Lending when Microfinance Meets the Market: A Reconsideration of the Besley--Coate Model

URN to cite this document:: urn:nbn:de:bvb:355-epub-344956
DOI to cite this document:: 10.5283/epub.34495

Arnold, Lutz G. ; Reeder, Johannes ; Steger, Susanne

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Date of publication of this fulltext: 26 Aug 2016 12:53

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Abstract

Besley and Coate (1995) analyse the impact of joint liability and social sanctions on repayment rates when repayment enforcement is imperfect. Motivated by the microfinance industry’s move towards markets, we conduct an equilibrium analysis of the Besley–Coate model. We find that individual loan contracts may be used in market equilibrium, even though group lending entails the higher repayment ...