We develop a model to study the choice between formal and informal sources of credit in a setting with strategic default due to limited enforcement. Informal loans (e.g., from friends or relatives) are enforced by the threat of both parties losing the friendship relation. In contrast, formal...

This paper studies the problem of financing a child's primary education when the parent is faced with credit constraints, contracting with minors is not possible and the legal enforceability of contracts is limited – a profound problem in many developing countries. It presents a model in which...

This paper studies the problem of financing a child's primary education when the parent is faced with credit constraints, contracting with minors is not possible and the legal enforceability of contracts is limited – a profound problem in many developing countries. It presents a model in...

Lending to the poor is expensive due to high screening, monitoring, and enforcement costs. Group lending advocates believe lenders overcome this by harnessing social connections. Using data from FINCA-Peru, I exploit a quasi-random group formation process to find evidence of peers successfully...

Lending to the poor is expensive due to high screening, monitoring, and enforcement costs. Group lending advocates believe lenders overcome this by harnessing social connections. Using data from FINCA-Peru, I exploit a quasi-random group formation process to find evidence of peers successfully...

Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which grew with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group liability claims to improve repayment rates and lower...

Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The...

Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The...