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Repayment Performance in Group Lending: Evidence from Jordan

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Abstract
Using data from a survey of 160 urban borrowing groups of the Microfund for Women in Jordan, we investigate the effect of screening, peer monitoring, group pressure, and social ties on borrowing groups� repayment behavior as an indirect test of different theoretical models. The dependent variable used captures the intensity of default measured by the total number of days of late repayment after each due date, allowing us to use count data models with cluster standard errors. As theory predicts, our empirical analysis suggests that peer monitoring, group pressure, and social ties reduce delinquency. The paper uncovers interesting evidence about the role of social ties and religion. Most notably, in an area where religion contributes to attitudes and beliefs of individuals, we find that religiosity improves repayment performance.

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  • Sudipta Sarangi & Moh'd Al-Azzam & R. Carter Hill, 2011. "Repayment Performance in Group Lending: Evidence from Jordan," Departmental Working Papers 2011-09, Department of Economics, Louisiana State University.
    • Handle: RePEc:lsu:lsuwpp:2011-09
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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