Solidarity Group Lending and Global Games
نویسندگان
چکیده
I study microfinance solidarity group lending within a global game framework. Group members invest independently in either a safe or a risky project. Ex ante observation and coordination on the choice of projects is not always possible. Though risky projects allow microentrepreneurs to extract risk premia, safe projects raise the probability of success of the group loan, in which case group members benefit from access to business support services provided by the microfinance institution. I show how borrowers’ perception of the strength of social cohesion within the microentrepreneurial community induces coordination on safe project choices.
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