We analyze the role of debt in persuading an entrepreneur to pay out cash ows, rather than to divert them. In the Žrst part of the paper we study the optimal debt contract—speciŽcally, the trade-off between the size of the loan and the repayment—under the assumption that some debt contract is optimal. In the second part we consider a more general class of (nondebt) contracts, and derive suffic...

Abstract Subject and purpose of work: The present paper assesses the loan utilisation repayment behaviour loanee or indebted farmers in Haryana, India. Materials methods: study was conducted Haryana state. is based on primary data that have been collected through schedules from a sample 600 farmers. Proportionate sampling employed. Further, percentage used for analysis. Results: found about hal...

It is well known that conflicts of interests between borrowers and creditors can raise the cost of external financing. In this paper we provide new evidence that borrower-creditor conflicts of interests also affect the sensitivity of debt financing to aggregate business conditions. In the presence of incomplete contracts, creditors cannot fully observe or verify diversion of free cash flow by b...

Abstract Although the social capital, in terms of stronger interpersonal relationships between group borrowers, has been found to exert a positive impact on loan repayment, there is no existing research that endeavored study influence relationship quality individual borrowers repayment. Therefore, this seeks understand and its dimensions repayment using data gathered from survey 450 joint liabi...

Empirical evidence on peer intermediation lags behind many years of lending practice and a large body of theory in which lenders use peers to mitigate adverse selection and moral hazard. Using a simple referral incentive mechanism under individual liability, we develop and implement a two-stage field experiment that permits separate identification of peer screening and enforcement effects. We a...

This paper exploits a natural experiment to document adverse selection among prime consumer credit borrowers in the US. In our setting, some borrowers are offered only a short term loan while an observationally equivalent set of borrowers is offered the same short term loan as well as an additional long maturity option. We isolate adverse selection from the causal effect of maturity on repaymen...

The study presents the issues of rural women in Sadar Upazila of Gazipur district considering their participation in micro credit programs for poverty alleviation. Data were collected from 75 BRAC women beneficiaries of four villages following random sampling techniques. On the basis of credit, the respondent’s have been classified into three categories. These are: i) A-small credit (up to Tk.4...

Microfinance through joint liability or group lending has received a lot of attention recently from policy makers as well as academicians. It is playing important role in delivering financial services to the ‘socially and economically excluded’ poor, in general, and women, in particular. Grouplending works with various dynamic incentives. One such is the principle of progressive lending which p...