Rules and Actions : Determinants of Peer Group and Staff Actions in Group-Based Microcredit Programs in the United States

Microcredit loan programs are known to have highrepayment rates. This study examines the program structures of peer grouplending programs (PGLPs) as one component that helps to bring this about.Attempts to determine whether the program rules trigger the desiredbehavior of participants and staff at various stages of loan transactions, suchas screening, monitoring, and enforcement. The study examines: (1) the programrules among PGLPs in the United States; (2) the pattern of screening,monitoring, and enforcement that peer group members and program staff gothrough; and (3) the extent to which the patterns above are influenced by thedifferences in the program rules. Data used in this paper were collected from 33 PGLP sites in 16 U.S. states.Survey questionnaires and interviews were also conducted between May andOctober 1996. Regression analyses were used to determine the impact of programrules on screening, monitoring, and enforcement. The findings suggest thatdifferent types of program rules (related to, e.g., boundaries, authority,access to information, and empowerment)have their intended effects onstaff and peer group actions. Staff actions at all three stages of a loan cyclewere found to respond positively to rules of empowerment. Program rules werefound to have differential effects on peer group actions at the three stages ofloan transactions. The findings also indicate that the randomness of peerscreening points to the challenge to replicate the peer group lending methodsin different contexts. (CBS)