Asymmetric group loans, non-assortative matching and adverse selection

Shubhashis Gangopadhyay, Robert Lensink*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

1 Citation (Scopus)

Abstract

This paper shows that an asymmetric group debt contract, where one borrower co-signs for another, but not vice versa, leads to heterogeneous matching. The analysis suggests that micro finance organizations can achieve the first best by offering asymmetric group contracts. (C) 2014 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)185-187
Number of pages3
JournalEconomics Letters
Volume124
Issue number2
DOIs
Publication statusPublished - Aug-2014

Keywords

  • Cosigning
  • Group lending
  • Joint liability
  • Asymmetry of information
  • Credit rationing
  • Micro finance
  • JOINT LIABILITY

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