Asymmetric Group Loan Contracts: Experimental Evidence

We design an experiment to study the role of (a)symmetry in context group lending with joint liability. The performance joint-liability contracts crucially hinges on borrowers engaging peer monitoring. find that asymmetric contracts, which monitoring is a dominant strategy for one borrower, increase rate, and thus repayment rate performance. Moreover, symmetric contracting also increases expected profits institution. Overall, our results suggest are worth considering as part policy maintain financial stability.