Microcredit Groups and Support: An Examination of Group Member Characteristics and Individual Outcomes

Paternoster, Paul
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While the microcredit group has existed since its introduction by Mohammed Yunus in 1976, very few studies address a key feature – the individual and collective characteristics of the group members themselves. Group members depend on each other to pay off the loans for which they are jointly liable, and, unlike many corporate teams, they form their own groups, with some guidance but no coercion from the lending officer. Drawing on data from a survey of 249 micro-entrepreneurs within 25 lending groups from Nairobi, Kenya, this study uses five group formation mechanisms, and within- and between-group analysis, to examine how group member characteristics relate to the members’ businesses performance. Of note, I find personality-based group leader selection and trust-based group member selection characterize groups with significantly higher average sales of members. This thesis suggests pursuit of a neglected line of investigation into how to make microcredit more effective.

Microcredit, Entrepreneurship, Networks, Groups