BUS 082 Lecture Notes - Lecture 30: Grameen Bank, Adverse Selection, Moral Hazard

• School: College of The Sequoias
• Department: Business (BUS)
• Course: BUS 082
• Professor: gradin

Document Summary

They are less mobile, local reputation is important. Social goal: lending to women may improve women"s empowerment. Women are more likely to have no other access to credit: may have higher return. Many mfis are convinced that a regular repayment is essential for repayment. Group lending (max. five women) with joint liability. Single loan provided to group of borrowers: women are responsible for each other"s fraction of the loan. A screening effect: women will only want to join other reliable women (client selection) A monitoring effect: women will monitor each other (social stigma) and support each other (social collateral) Progressive lending (very small loans initially, which become larger over time) Provides strong incentives to avoid default and reduce risk. Relatively high interest rates (at least 20% a year, often much more) Interest rates remain high (between 15% and 35% per year) Grameen bank"s repayment rates of over 98% fell in the late 1990s and early.