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Commercialization and the Decline of Joint Liability Microcredit

21 Set 10:00
Sala Santander (Quelhas Building)

Commercialization and the Decline of Joint Liability Microcredit seminar is scheduled for 
September 21st
14:30, in Santander Lecture Room (Quelhas Building, ISEG) 

Presenter: Maitreesh Ghatak 

Discussant: José Pedro Pontes 


Numerous authors point to an apparent decline in joint liability microcredit, and rise in individual liability lending. But empirical evidence is lacking, and there have been no rigorous analyses of possible causes. In this paper, we first show using the well-known MIX Market dataset that there is indeed evidence for a decline.

Second, we show theoretically that a plausible cause is commercialization: an increase in competition and a shift from non-profit to for-profit lending, both of which are present in the data, drive lenders to reduce their use of joint liability loan contracts.

Third, we test the model's key predictions, and find support for them in the data. Commercialization does indeed seem to be a contributor to the decline of joint liability. 


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