Interdependencies in Micro- Credit Group: Evidence from Repayment Data*

We use repayment data from Grameen Bank groups to study mutual dependence in behavior among participants. Such dependence is a measure of group cohesion, and is interpreted as evidence for the existence of inter-connectedness among members at the group level. Results from a dynamic fixed-effects probit model demonstrate that individual repayment outcomes are significantly influenced by own lagged repayment behavior, and by averages of lagged repayment behaviors for the remaining members of a group. Simulations of own and cross effects between participants provide further support for strong inter-dependencies at the group level in repayment outcomes. By strengthening mutual support networks, such inter-dependencies may be crucial for poverty alleviation in developing countries such as Bangladesh. JEL Classifications: 012, 016, D70