NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Yanyan Liu

IFPRI (International Food Policy Research Institut
Senior Fellow
Washington, DC 20006-1002

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NBER Working Papers and Publications

February 2013Group Lending with Heterogeneous Types
with Li Gan, Manuel A. Hernandez: w18847
Group lending has been widely adopted in the past thirty years by many microfinance institutions as a means to mitigate information asymmetries when delivering credit to the poor. This paper proposes an empirical method to address the potential omitted variable problem resulting from unobserved group types when modeling the repayment behavior of group members. We estimate the model using a rich dataset from a group lending program in India. The estimation results support our model specification and show the advantages of relying on a type-varying method when analyzing the probability of default of group members.
 
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