Group Lending, Joint Liability, and Social Capital: Insights from the Indian Microfinance Crisis

Politics and Society, Vol. 44(4), p. 459–497, 2016

Columbia Business School Research Paper No. 17-19

Posted: 27 Jan 2017

See all articles by Antara Haldar

Antara Haldar

University of Cambridge

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: November 9, 2016

Abstract

This article grapples with the causes of India’s microfinance crisis. By contrasting Bangladesh’s highly successful Grameen model with the allegedly “universalizable” version of India’s SKS Microfinance (which precipitated the crisis), trust or social capital is isolated — not just narrowly interpreted within standard economic theory, but more broadly construed — as the essential element accounting for the early success of microfinance. It is argued that the microfinance experience has been widely misinterpreted, in both analytical and policy terms. This article suggests inherent limits in extending the model to for-profit institutions and, in particular, to the pace of scaling up.

Keywords: Microfinance, Microfinance and Social Capital, Indian Microfinance Crisis, Microfinance For-Profit, Scaling Microfinance

JEL Classification: O10, O17, Z13, K12, K42, G01, G21

Suggested Citation

Haldar, Antara and Stiglitz, Joseph E., Group Lending, Joint Liability, and Social Capital: Insights from the Indian Microfinance Crisis (November 9, 2016). Politics and Society, Vol. 44(4), p. 459–497, 2016; Columbia Business School Research Paper No. 17-19. Available at SSRN: https://ssrn.com/abstract=2905302

Antara Haldar (Contact Author)

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

HOME PAGE: http://www.law.cam.ac.uk/people/academic/haldar/944

Joseph E. Stiglitz

Columbia Business School - Finance and Economics ( email )

3022 Broadway
814 Uris Hall
New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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