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| Author: | Karlan, D.S. |
| Title: | Social connections and group banking |
| Journal: | Economic Journal
2007 : FEB, VOL. 117:517, p. F52-F84 |
| Index terms: | groups liability loans poverty Peru |
| Language: | eng |
| Abstract: | Due to high screening, monitoring and enforcement costs, it is expensive to lend to the poor. Group lending advocates believe lenders overcome this by harnessing social connections. This study uses data from FINCA-Peru to exploit a quasi-random group formation process to find evidence of peers successfully monitoring and enforcing joint-liability loans. The results show that individuals with stronger social connections to their fellow group members have higher repayment and higher savings. |
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