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State the disadvantages of Group Lending.

State the disadvantages of Group Lending.

Answers

Kavungya
- Peer monitoring - if the population of potential borrowers is dispersed and local
information is weak and costly to obtain, group monitoring activities are hard to
implement.
- If group lending takes place in urban areas, where labor mobility is high and
individuals may not have much information about their potential partners, group
lending becomes difficult.
- If borrowers cannot observe each other’s effort levels (or are otherwise reluctant
to punish shirkers) then group lending can undermine incentives by encouraging
“free riding.”
Kavungya answered the question on March 26, 2019 at 08:53

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