Commercialization and the decline of joint liability microcredit

de Quidt, Jonathan, Fetzer, Thiemo and Ghatak, Maitreesh ORCID: 0000-0002-0126-0897 (2018) Commercialization and the decline of joint liability microcredit. Journal of Development Economics, 134. pp. 209-225. ISSN 0304-3878

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Abstract

Numerous authors point to a decline in joint liability microcredit, and rise in individual liability lending. But empirical evidence is lacking, and there have been no rigorous analyses of possible causes. We first show using the well-known MIX Market dataset that there is evidence for a decline. Second, we show theoretically that commercialization–an increase in competition and a shift from non-profit to for-profit lending (both of which are present in the data)–drives lenders to reduce their use of joint liability loan contracts. Third, we test the model's key predictions, and find support for them in the data.

Item Type:	Article
Divisions:	Economics Centre for Economic Performance
Date Deposited:	23 Oct 2019 15:57
Last Modified:	01 Nov 2024 06:27
URI:	http://eprints.lse.ac.uk/id/eprint/102188

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