Ex-ante moral hazard and repayment performance under group lending

This paper aims to investigate compared to individual liability lending, whether group lending has information advantage of overcoming ex-ante moral hazard and efficiency advantage of improving repayment performance. This paper is an attempt to contribute to the ex-ante moral hazard literature by formalizing the dynamic incentive of ”non-refinancing threat”. A main implication of this paper is that ”non-refinancing threat” has much effect on borrower's effort choice and repayment performance under both group lending and individual liability lending…

group lending

joint liability

ex-ante moral hazard

non-refinancing threat