TY - JOUR
T1 - Switching from group lending to individual lending
T2 - the experience at China’s largest microfinance institution
AU - Xu, Yuyun
AU - Cheng, Wenli
AU - Zhang, Longyao
N1 - Funding Information:
This work was supported by the National Natural Science Foundation of China [71573125,71773049]. We thank the editor Ali Kutan, two anonymous referees, and discussants and participants at the 2018 International Finance and Accounting Conference of Northwest A&F University for valuable comments and discussions.
Publisher Copyright:
©, Copyright © Taylor & Francis Group, LLC.
Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.
PY - 2020
Y1 - 2020
N2 - We analyze group and individual lending using data from 26,579 loan-specific observations in 2014–2016 for CFPA Microfinance, China’s largest microfinance institution (MFI). We show that MFIs in China have converted a large share of their group liability portfolio into individual liability lending, particularly in southern China. Changes in loan contracts, especially loan size and interest rates, significantly increased repayment risk, whereas long borrowing history improved repayment performance. The higher repayment risk of individual lending was likely compensated by higher interest income. Our research indicates that, under certain circumstances, individual lending can be an important form of loans for MFIs.
AB - We analyze group and individual lending using data from 26,579 loan-specific observations in 2014–2016 for CFPA Microfinance, China’s largest microfinance institution (MFI). We show that MFIs in China have converted a large share of their group liability portfolio into individual liability lending, particularly in southern China. Changes in loan contracts, especially loan size and interest rates, significantly increased repayment risk, whereas long borrowing history improved repayment performance. The higher repayment risk of individual lending was likely compensated by higher interest income. Our research indicates that, under certain circumstances, individual lending can be an important form of loans for MFIs.
KW - group lending
KW - individual lending
KW - microfinance
KW - repayment risk
UR - http://www.scopus.com/inward/record.url?scp=85075971063&partnerID=8YFLogxK
U2 - 10.1080/1540496X.2019.1636228
DO - 10.1080/1540496X.2019.1636228
M3 - Article
AN - SCOPUS:85075971063
SN - 1540-496X
VL - 56
SP - 1989
EP - 2006
JO - Emerging Markets Finance and Trade
JF - Emerging Markets Finance and Trade
IS - 9
ER -
