@techreport{98f332cbac35472e824a628f54d8e7c9,
title = "Optimal Joint Liability Lending and with Costly Peer Monitoring",
abstract = "This paper characterizes an optimal group loan contract with costly peer monitoring. Using a fairly standard moral hazard framework, we show that the optimal group lending contract could exhibit a joint-liability scheme. However, optimality of joint-liability requires the involvement of a group leader, who heavily takes care of the partner's repayment share in bad states and gets compensated in expected terms. This key result holds even for a group of borrowers, which exhibits homogeneous characteristics in productivity, risk aversion and monitoring costs. Our work rationalizes the widely-applied group-leadership concept of micronance programmes as an outcome of an optimal contract.",
keywords = "micro-finance, joint-liability, group leader",
author = "F. Carli and R.B. Uras",
year = "2014",
month = dec,
day = "2",
language = "English",
volume = "2014-013",
series = "EBC Discussion Paper Series",
publisher = "EBC",
type = "WorkingPaper",
institution = "EBC",
}