Risk Behaviour and Group Formation in Microcredit Groups in Eritrea

CREDIT Research Paper No. 03/02

38 Pages Posted: 14 May 2003

See all articles by Robert Lensink

Robert Lensink

University of Groningen - Department of Economics, Econometrics and Finance; Wageningen UR - Development Economics Group

Habteab T. Mehrteab

University Of Asmara

Date Written: January 2003

Abstract

We conducted a survey in 2001 among members and group leaders of borrowers who accessed loans from two microcredit programs in Eritrea. Using the results from this survey, this paper aims to provide new insights on the empirical relevance of the homogeneous matching hypothesis for microcredit groups in Eritrea. Since the methodology to test for homogeneous matching needs estimating risk behaviour, the paper also provides new evidence on risk behaviour of members of microcredit groups in Eritrea. Our main results strongly indicate that groups are formed heterogeneously. Most importantly, we do not find support for the matching frictions hypothesis, in the sense that even if we control for matching frictions, credit groups in Eritrea do not seem to consist of borrowers of the similar risk type.

Suggested Citation

Lensink, Robert and Mehrteab, Habteab T., Risk Behaviour and Group Formation in Microcredit Groups in Eritrea (January 2003). CREDIT Research Paper No. 03/02, Available at SSRN: https://ssrn.com/abstract=380700 or http://dx.doi.org/10.2139/ssrn.380700

Robert Lensink (Contact Author)

University of Groningen - Department of Economics, Econometrics and Finance ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

Wageningen UR - Development Economics Group ( email )

Hollandseweg 1
WAGENINGEN, 6706 KN
Netherlands

Habteab T. Mehrteab

University Of Asmara ( email )

Asmara, Eritrea
Ethiopia

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