Micro-Finance Crises: Effects of Economic and Psychological Threats on Group Processes

44 Pages Posted: 6 Jul 2016

See all articles by Anjana Dube

Anjana Dube

Indian Institute of Management Bangalore; NSSO (DPC), MOS&PI

Rajalaxmi Kamath

Indian Institute of Management (IIMB), Bangalore

Date Written: June 2016

Abstract

We report the findings of an experiment conducted around MFI group processes to parse the question of potential default by members, often the tipping point of crises. Micro-finance group processes entail economic and psychological costs to members. We defined these costs in terms of a given financial loss and reputation loss, perceived by members as economic and psychological threats. Participants responded to the measures of joint liability, fear of reprisal and peer pressure. The results show that members are able to make the subtle distinction between different types of peer pressure and joint liability. We also show that psychological threats perceived by borrowers are key to understanding MFI group processes, especially as triggers to a repayment crisis.

Keywords: micro finance - crisis, group processes, measurement model, field experiment

Suggested Citation

Dube, Anjana and Kamath, Rajalaxmi, Micro-Finance Crises: Effects of Economic and Psychological Threats on Group Processes (June 2016). IIM Bangalore Research Paper No. 520, Available at SSRN: https://ssrn.com/abstract=2804905 or http://dx.doi.org/10.2139/ssrn.2804905

Anjana Dube (Contact Author)

Indian Institute of Management Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

NSSO (DPC), MOS&PI ( email )

3rd Floor, F Wing,Kendriya Sadan
Kormangala
Bangalore, Karnataka 560076
India

Rajalaxmi Kamath

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

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