Format:
1 Online-Ressource (30 p)
Series Statement:
European Banking Center Discussion Paper Series No. 2014-013
Content:
This paper characterizes an optimal group loan contract with costly peer monitoring. Using a fairly standard moral hazard framework, we show that the optimal group lending contract could exhibit a joint-liability scheme. However, optimality of joint-liability requires the involvement of a group leader, who heavily takes care of the partner's repayment share in bad states and gets compensated in expected terms. This key result holds even for a group of borrowers, which exhibits homogeneous characteristics in productivity, risk aversion and monitoring costs. Our work rationalizes the widely-applied group-leadership concept of micro finance programmes as an outcome of an optimal contract
Note:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 2, 2014 erstellt
Language:
English
DOI:
10.2139/ssrn.2533401
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