Economic modelling of microfinance lending

Abstract

Microfinance has usually relied on groups borrowing money together and being responsible for each other’s loans. But nowadays, microfinance institutions are leaning more towards giving loans to individuals instead of groups. Studies have found that when they made this switch, it didn’t really change how well people paid back their loans. Interestingly, when they worked on making social connections stronger for individuals borrowing money alone, it actually made a big difference in how well they paid back their loans. Our study aims to dig deeper into this topic. We want to compare how people’s lives are affected when they borrow money as individuals, either by themselves or in a group. We’re going to look at things like how much money they make, their overall well-being, and other aspects of their lives. By doing this, we hope to understand better how borrowing money from microfinance institutions impacts people, and how these changes might influence how these institutions work in the future to help more people.