Commercialization and the Decline of Joint Liability Microcredit seminar is scheduled for
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.
Secretary of the Economics Department