Repayment performance in group-based credit programs in Bangladesh: An empirical analysis uri icon

abstract

  • This paper analyzes the repayment rates of 128 credit groups belonging to three group-based credit programs in Bangladesh: the Association for Social Advancement (ASA), the Bangladesh Rural Advancement Committee (BRAG), and the Rangpur Dinajpur Rural Service (RDRS). Using TOBIT analysis, specific tests are performed on the following hypothesized determinants: group size, size of loans, degree of loan rationing, enterprise mix within groups, demographic characteristics, social ties and status, and occurrence of idiosyncratic shocks. The paper concludes that if basic principles of prudential banking are adhered to, repayment rates can be good even in poor and remote communities. The important thing for financial institutions is to tailor services such that it becomes worthwhile for the poor to establish a profitable long-term association. In addition, more freedom to members in the process of group formation is recommended. (C) 1997 Elsevier Science Ltd.

publication date

  • 1997
  • 1997
  • 1997