Microfinance beyond group lending

B. A. De Aghion, Jonathan Morduch

Research output: Contribution to journalArticlepeer-review

Abstract

Microlending is growing in Eastern Europe, Russia and China as a flexible means of widening access to financial services, both to help alleviate poverty and to encourage private-sector activity. We describe mechanisms that allow these programmes to successfully penetrate new segments of credit markets. These features include direct monitoring, regular repayment schedules, and the use of non-refinancing threats. These mechanisms allow the programmes to generate high repayment rates from low-income borrowers without requiring collateral and without using group lending contracts that feature joint liability.

Original languageEnglish (US)
Pages (from-to)401-420
Number of pages20
JournalEconomics of Transition
Volume8
Issue number2
DOIs
StatePublished - 2000

Keywords

  • Joint liability
  • Microfinance
  • Poverty relief
  • Repayment incentives
  • Transition

ASJC Scopus subject areas

  • Economics and Econometrics

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