Does the Group Leader Matter? The Impact of Monitoring Activities and Social Ties of Group Leaders on the Repayment Performance of Group-Based Lending in Eritrea

33 Pages Posted: 9 Mar 2006

See all articles by Niels Hermes

Niels Hermes

University of Groningen - Faculty of Economics and Business

Robert Lensink

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

Habteab Teki Mehrteab

University of Groningen

Date Written: June 2005

Abstract

This paper analyzes whether the effects of monitoring and social ties of the group leader and other group members on repayment performance of groups differ, using data from an extensive questionnaire held in Eritrea among participants of 102 groups. We hypothesize that the monitoring activities and social ties of the group leader have a stronger positive impact on the repayment performance of groups. The results show that social ties of the group leader do have a positive effect on repayment performance of groups, whereas this is not true for social ties of other group members. We do not find evidence for the hypothesis that monitoring activities of the group leader have a stronger positive impact on group repayment performance. All variables measuring monitoring activities, either of the group leader or the other group members, are found to be statistically insignificant.

Keywords: Group lending, repayment performance, monitoring, social ties, Eritrea

JEL Classification: D82, G29, O16

Suggested Citation

Hermes, Niels and Lensink, Robert and Mehrteab, Habteab Teki, Does the Group Leader Matter? The Impact of Monitoring Activities and Social Ties of Group Leaders on the Repayment Performance of Group-Based Lending in Eritrea (June 2005). Available at SSRN: https://ssrn.com/abstract=888669 or http://dx.doi.org/10.2139/ssrn.888669

Niels Hermes

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

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 Teki Mehrteab

University of Groningen ( email )

P.O. Box 800
9700 AV Groningen, Groningen 9700 AV
Netherlands

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