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In recent years, microfinance institutions have expanded into group lending with individual liability, leaving out the …
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How has the microcredit movement managed to push financial frontiers? Theory shows that if borrowers vary in … attract safer borrowers and rouse an otherwise dormant credit market. We extend the theory to include correlated risk, and … type of risk exposure. Evidence supports the theory, in that groups are more homogeneous in riskiness but less diversified …
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The success of joint liability programs depends on nature and composition of borrowing groups. Group formation is a costly process and in our model these costs vary with the social identity of group partners. We show that risk heterogeneity in a borrowing group may arise due to the social...
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