We examine group-lending under sequential financing. In a model with moral hazard, social capital and endogenous group formation, we identify conditions such that sequential financing with joint liability leads to positive assortative matching between borrowers with and without social capital...

This paper focuses on the dynamic aspects of group-lending, in particular sequential financing and contingent renewal. We examine the encacy of these two schemes in harnessing social capital. We find that, for the appropriate parameter configurations, there is homogenous group-formation so that...

We develop a simple model of group-lendingbased on peer monitoring and moral hazard. We find that, in the absence of sequential financing or lender monitoring, group-lending schemes may involve under-monitoring with the borrowers investing in undesirable projects. Moreover, under certain...