Choice between Microfinance Systems Operating on the Basis of Individual Liability Loan Contract or through Joint Liability Loan Contract

17 Pages Posted: 23 May 2009

Date Written: May 23, 2009

Abstract

In this paper we consider that a representative of a not so affluent rural household has three options. He (she) may join in a microfinance system operating on the basis of individual liability credit contract, or on the basis of joint liability loan contract through forming self-help group or may not participate in any type of microfinance system. This paper establishes that wealthier among the not so affluent rural household prefers to join microfinance system operating on the basis of individual liability loan contract, comparatively less wealthy prefers to join microfinance system operating on the basis of joint liability loan contract and ultra poor is less likely to join any type of microfinance system. This paper establishes that a household with high dependency ratio and higher intra-household decision making power of the head of the women of that household also influences the household to join microfinance system and in both the situations the probability of joining microfinance system operating on the basis of joint liability loan contract is slightly higher. It is also established that microfinance system fails to solve the ageing problem in rural areas because aged persons are less prone to join in any type of microfinance system.

Keywords: Microfinance, Individual liability, Joint Liability

JEL Classification: G21, O16, P25, R21

Suggested Citation

Kundu, Amit, Choice between Microfinance Systems Operating on the Basis of Individual Liability Loan Contract or through Joint Liability Loan Contract (May 23, 2009). Available at SSRN: https://ssrn.com/abstract=1408942 or http://dx.doi.org/10.2139/ssrn.1408942

Amit Kundu (Contact Author)

Jadavpur University ( email )

188, Raja S.C. Mallick Rd, Kolkata 700032
Calcutta, West Bengal 700032
India

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