Risk-matching behavior in microcredit group formation: evidence from northern Ethiopia

• Published in: Agricultural economics Vol. 40; no. 4; pp. 409 - 419
• Main Authors: Berhane, Guush, Gardebroek, Cornelis, Moll, Henk A.J
• Format: Journal Article
• Language: English
• Published: Malden, USA Blackwell Publishing Inc 01.07.2009; International Association of Agricultural Economists
• Series: Agricultural Economics
• Subjects: adverse selection; credit associations; D82; Ethiopia; G20; Group formation; information; L14; markets; Microfinance; O17; peer selection; repayment performance; Risk homogeneity; Risk matching; rotating savings; Ethiopia

Theoretical models on group lending assume the formation of groups of homogenous risk types. Recent theoretical and empirical findings challenge this view arguing that when markets for insurance are missing, risk homogeneity may not hold any more and risk heterogeneity can be the optimal outcome. Us...