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Adriana de la Huerta Ph.D. Candidate, Department
of Economics University of Chicago |
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I am currently on the job market and will be
available for interviews at the ASSA Annual Meeting in Denver, CO, January
6-9, 2011 Job Market
Paper Microfinance in Rural and Urban Thailand:
Policies, Social Ties and Successful Performance It has been well documented in the theoretical economic literature
that joint liability group-based lending helps to overcome the hurdles of
adverse selection, moral hazard, auditing cost and enforcement by exploiting
local information embodied in specific social networks. Much less attention
has been given to explain how other features of microcredit contracts have
opened up possibilities for microfinance. In this paper I study a joint
liability lending program in Thailand to analyze how social ties and policies
such as compulsory savings and training contribute to explain the success of
the program in terms of repayment rates in rural and urban communities. I use
a novel panel dataset on household loans constructed from household,
institutional and community-level data from the Townsend Thai Data
Collection. Empirical results are consistent with the repayment predictions
of existing theories on joint liability lending. The findings suggest that
joint liability may prosper in areas in which social ties are strong enough
to permit individuals to costlessly enforce agreements in their community,
and the threat of social sanctions exists and is credible. Additionally, I
find evidence that suggests that households in rural areas have some
knowledge about the customs and characteristics of people and institutions in
the region which varies across communities and predicts success and failure
of the microfinance program. The estimation results also indicate that the
degree of joint liability in the fund is negatively associated with
repayment; and that practices such as requiring compulsory savings and
providing training or information to borrowers are positive predictors of
repayment in both rural and urban environments. The findings are robust to a
number of specification checks. |
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Contact
Information: Email:
ahuerta@uchicago.edu |
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