New Microfinance? Informal Credit and Group Lending in Competitive Markets

In this paper we present a model of competition between informal lending and group lending. The paper is organized as follows. The second paragraph reviews the economic literature that analyzes separately group contracts and informal lending markets. The third paragraph tries to answer the following question: "Can the credit group play a role in competitive markets?", where competitive markets are characterized by two features: markets where the lender acts under no profit condition, and at the same time the borrower can choose among different types of contracts (i.e., informal lending contracts and credit group contracts). The fourth paragraph concludes