Enforcing Repayment in Lending without Collateral: An Empirical Survey on Group Lending Microfinance

In this study, we are exploring factors affecting repayment in group lending microfinance. Theoretically, it is generally claimed that join liability obligation in group lending enforces repayment. Though our empirical survey find that joint liability creates peer pressure and peer monitoring and very often helps ensuring repayment, it is not free from weakness and is not necessary at all lending the poor. We see that dynamic loan incentive can ensure repayment even in absence of joint liability. We also find other factors that affect repayment. The study thus, shows that joint liability is neither necessary nor sufficient in enforcing repayment rather there are scores of innovations in group lending microfinance, like dynamic and progressive lending that help MFIs to boost up repayment.