Group Lending or Individual Lending? Evidence from a Randomized Field Experiment in Rural Mongolia

Forthcoming in the American Economic Journal: Applied Economics

CentER Discussion Paper Series No. 2013-074

68 Pages Posted: 10 Dec 2013 Last revised: 15 Jul 2014

See all articles by Orazio Attanasio

Orazio Attanasio

University College London - Department of Economics; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Britta Augsburg

Institute for Fiscal Studies (IFS); UNU-MERIT

Ralph De Haas

European Bank for Reconstruction and Development; Centre for Economic Policy Research (CEPR); Tilburg University - Department of Finance

Emla Fitzsimons

Institute for Fiscal Studies (IFS)

Heike Harmgart

European Bank for Reconstruction and Development (EBRD)

Date Written: November 19, 2013

Abstract

We present evidence from a randomized field experiment in rural Mongolia on the comparative poverty impact of group versus individual microcredit. We find a positive impact of group loans but not of individual loans on entrepreneurship and food consumption. Moreover, group borrowers are less likely to make informal transfers to families and friends while the opposite holds true for individual borrowers. This suggests that joint liability may deter borrowers from using loans for non-investment purposes with stronger impacts as a result. We find no difference in repayment rates between both types of microcredit.

Keywords: Microcredit; poverty; randomized field experiment

JEL Classification: 016, G21, D21, I32

Suggested Citation

Attanasio, Orazio and Augsburg, Britta and De Haas, Ralph and Fitzsimons, Emla and Harmgart, Heike, Group Lending or Individual Lending? Evidence from a Randomized Field Experiment in Rural Mongolia (November 19, 2013). Forthcoming in the American Economic Journal: Applied Economics, CentER Discussion Paper Series No. 2013-074, Available at SSRN: https://ssrn.com/abstract=2365432 or http://dx.doi.org/10.2139/ssrn.2365432

Orazio Attanasio (Contact Author)

University College London - Department of Economics ( email )

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United Kingdom
+44 20 7679 5880 (Phone)
+44 20 7916 2775 (Fax)

Institute for Fiscal Studies (IFS)

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Britta Augsburg

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

HOME PAGE: http://www.ifs.org.uk/centres/EDePo

UNU-MERIT ( email )

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Netherlands

Ralph De Haas

European Bank for Reconstruction and Development ( email )

One Exchange Square
London, EC2A 2JN
United Kingdom

HOME PAGE: www.ebrd.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Emla Fitzsimons

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Heike Harmgart

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

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