Microfinance through joint liability or group lending has received a lot of attention recently from policy makers as well as academicians. It is playing important role in delivering financial services to the ‘socially and economically excluded’ poor, in general, and women, in particular. Grouplending works with various dynamic incentives. One such is the principle of progressive lending which p...

Relationship lending helps reduce asymmetric information, which potentially creates benefits for borrowers. However, empirical evidence is mixed. We conduct a meta-analysis to summarize and explain the heterogeneity in the results in the literature using hand-collected information from 101 studies in the U.S., Europe, Asia and Latin America from 1970-2010. We find that strong relationships are ...

Borrower level data from over 1,000 agricultural lending relationships are used to examine how several factors influence the costs and returns of extending agricultural credit. The characteristics of agricultural borrowers and their demand for various financial products and services are described. The results also provide estimates of the costs and returns of agricultural lending and the extent...

We use a model of mean-shifting investment technologies to study the relationship between market structure, risk taking and social welfare in lending markets. Introduction of loan market competition is shown to reduce lending rates and to generate higher investments without increasing the equilibrium bankruptcy risk of borrowers. Hence, there need not be a tradeo€ between lending market competi...

We derive an optimal dynamic lending contract in a simple adverse selection model with limited commitment on the borrower side. An optimal contract involves “penalty” rates after a default, and favorable rates after a success. It also charges higher rates for first-time borrowers than for repeat borrowers, as in “relationship” lending. We compare the efficiency of a group lending contract (of t...