Strategies for Loan Repayment Rates

Strategies for Loan Repayment RatesINTRODUCTION AND MOTIVATION need of access to the formal credit facility through formal banking and financial institutions has been one of the major hurdles faced by the deplorable people of the develop countries. in that respect are two main reasons widely discussed. Firstly, the commercial banks and institutions think that the add demanded by the poor people are in very beautiful amount and it is not economical for the banks to grant these loans. Secondly, these poor people often failed to provide every collateral, this makes their loan requirements risky, and conventional banks and institutions avoid entertaining these types of loans (Secondi, 2008). The solution to these problems was provided by microfinance programs. The primary objective of microfinance programs around the world is to reduce the poverty by providing small loans to the neglected poor people without the condition of collateral.Microfinance has gained a considerable hold ov er the past three decades collectible to its weapon of providing the credit access to the neglected poor people. In pursuit of the fight against poverty, small loans were provided by the microfinance institutions (MFIs) to the poor people so that they may utilize them to establish small businesses or expand their existing business and achieve self sufficiency. However, there has been considerable differences in the rate of interest charged on these loans by the various MFIs, quittance rates and level of self sufficiency achieved by the borrowers around the different regions of the development countries (Ahlin et al 2011).MFIs normally use convocation add methodology to expand the credit access to the poors. This methodology helps the microfinance clients to keep a check on the veracious utilization of the loan amount and also allowing only those persons to be the part of the grouping who possess a good moral and financial reputation in their society. Eventually, much of the loaners responsibility of the supervision is huckstered on to the group members. This helps the group members to effectively control the problems arising from fractional information on the financial health of the individuals intending to join the group (Armendariz and Morduch, 2005). It has been viewed that the group loan given under joint indebtedness lending pay offs play an effective role in enforcing the contract conditions of loan repayments through partner manageing by the group members. Under the joint/ group liability contracts, each group member is responsible for the repayment of the loan in cheek of any member reports default. on that pointfore, each group member act as guarantor for the others. It had been argued by various researchers that in a joint liability contracts the group members are well informed about their fellow group members compared to the MFIs or banks. on that pointfore, this peer monitoring by the group members is much more effective and a che aper than the MFIs (or banks) monitoring (Varian, 1990 Stiglitz, 1990 and Banerjee et al 1994).There are a number of studies1 suggesting that the group liability programs work better in addressing the problem incomplete information faced by the lenders and banks, as much of the responsibility has been shifted to the group members, resultantly lowering the cost faced by the MFIs. Some studies such as Tassel, 199 and Ghatak, 1999 argued that the in group liability loans, the self selection of the group members helps in reducing the problem of incomplete information and can generate higher repayment rates. There are various laboratory experimental studies tried to investigate the group liability loans and effects of peer monitoring on repayment rates. Such as, Cason et al (2009) in their study found that even the monitoring was a costly activity and subjects were required to pay the cost of monitoring, but still the group partners preferred to monitor each other. They also observed th at when the cost of monitoring paid by the group members was less than the cost paid by the lender, the group liability programs performed better than the individual liability programs. They also pointed out that in the absence of difference in monitoring cost (among group monitoring cost and lenders cost), the repayment behavior of the subjects remained almost similar in both group and individual lending cases. In another study conducted by Kono (2006) in Vietman, reported that even in the forepart of monitoring and imposition of penalties to the defaulters, the default rates were higher in group liability cases compared to the individual liability cases.There are few studies explaining the importance of social ties between the group members towards effective monitoring and loan repayment rates. There are a number of ways the social ties can be effective, one of the most important factors is the full information about the group members. This complete information makes it is much easier for the group members to monitor their fellow partners, and if required they can enforce the contract terms (Besley and Coate, 1995, Abbink et al 2006).However, we were interested in investigating the effect of peer monitoring and choice of microfinance contracts on the loan repayments. The peer monitoring has been discussed extensively in the literature, however, the evidence on the choice of microfinance contracts (i.e. The choice among the interest and non-interest based microfinance contracts) is non existent. We do observe studies addressing the choice among the individual and group lending contracts by the microfinance lenders (Gine and Karlan, 2008, Bhole and Ogden, 2010, Madajewicz, 2011). We conducted laboratory experiments with the students of the University of Sydney, Australia during October, 2013. In our study, there were four treatments and the subjects were offered the loan under the group liability scheme. A pair of two subjects conventional a group and there were 74 groups in total (148 subjects). In the first treatment, subjects can demand to monitor their partners repayment actions, past they were required to choose a contract from the given two contracts (PLS and IB). After choosing the contracts, they were recording their repayment actions. In the second treatment, subjects were allowed to go for monitoring, but they were not allowed to choose the contracts rather the experimenter had allocated the both PLS and IB contracts randomly and evenly. With the third treatment, there was no monitoring choice available to the subjects, but they were allowed to choose from the PLS and IB contracts. In the fourth and last treatment, subjects were neither allowed to monitor, nor allowed to choose from the PLS and IB contracts, the contacts were allocated by the experimenter in a randomly and evenly way. There were five rounds for each treatment and after every round the subjects were swapped randomly and it was ensured that the uniform subje ct should not be the matched with the other more than once. The subjects were able to identify their group partner through their roll numbers, but they cannot see and talk to him. There was a monitoring fee2 for all those subjects who were opting to monitor their group partner. Yet, while monitoring they can impose penalty on to their defaulted partner. The decision of monitoring or differently was a common knowledge for both the group partners.This experimental study was conducted to address the mentioning research questions.Whether peer monitoring and peer pressure (imposition of penalty) impress the repayment rates positively?Are there any choice taste perceptions for PLS and IB contracts? How choice of the contracts affects the repayment rates?Are there any gender particular differences in repayment rates?Whether the degree of religiousism affects the repayment behavior of the subjects?In summary, our results indicated that the monitoring had a significantly positive effect on the loan repayment rates in both with and without choice of contract cases. There were significantly higher proportion of subjects, choosing the PLS contact against the IB contract. Although, there was a high preference for PLS contracts, but at the resembling time we did not stigmatise any change in repayment rates for both PLS and IB contracts. Moreover, we noticed lower repayment rates in no monitoring with no selection of contract treatment. We did not observe any gender related differences. Also the results revealed that the degree of religiosity was not affecting the repayment behavior of the subject. For the empirical analysis of this experimental work, we use the percentages to analyze the repayment rates. Paired t-test and McNemars test were also utilize to examine the differences in behavioral responses of subjects across treatments. Finally, we applied panel logit regression methodology to check the significance of monitoring choices against the no monitoring cases and PLS contract against the IB contract in the presence of demographic and other control variables.The rest of the chapter continues as follows. Section 2 gives a literature overview. Section 3 describes the experimental contracts, program and execution. Results are discussed in Section 4 and in Section 5, we analyze the results and concluded the study.RELATED LITERATUREMicrofinance gained popularity and appreciation over the past three decades for its mechanism of offering small loan to those poor people who were generally excluded from the provision of formal credit facilities. The microfinance use its innovative lending methodology in the presence of incomplete information of the clients and non availability of physical collateral. Generally, lending techniques adopted by the MFIs were individual or group lending. The group lending can be used as screening tools whereas, the joint liability could work as the monitoring device within the group. Nevertheless, the group lending an d joint liability programs of micrfinance are considered as efficient instruments in the expansion of credit facility to the poor (Morduch, 1999 Armendariz and Morduch, 2005).Under the group lending strategy, all the members of the group were provided with the micro loans in their individual capacity. altogether the group members were then made jointly responsible for the repayment of the each others loan in case of default, also future they were denied from any loan facility by the MFIs (Morduch, 1999 Ghatak and Guinnane, 1999). It had been argued that the success of the group lending strategy has been the outcome of various reasons. Firstly, the screening of the clients by the group members, this helps in selecting the credible and honest persons in the group. Secondly, the group members keep a proper check on the utilization of the loan and also they keep on observing the efforts of each of their partners discombobulate exerted in order to make his investment project successf ul. Lastly, each group member faces a peer pressure from his partner which forces them to comply with the repayment conditions of the loan, on with peer pressure the group members have to face social pressure from their society they were living which enforces the contract conditions of loan repayment. In this way it became possible for the lenders to shift their burden on to the borrowers and the problems occurred due to incomplete information can be handled at the borrowers end (Microcredit Summit Compaign, 2005).In the existing literature, there are a number of works explaining the positive impacts of microfinance programs for the small line and investment activities. It has also been pointed out that the implications of microfinance programs kept on varying from borrower to borrower and repayment behavior was not same across the borrowers (Crepon et al. (2011) Banerjee et al. (2010)). On the other hand, there are studies focusing on the merits and demerits of group/joint-liabili ty loans and stressed that the joint liability loans were successful in increasing the repayment rates (Banerjee et al. (1994) Van Tassel (1999) Wydick (2001)). Entirely the same, it had also been mooted by a number of researchers that the espousal of a group or joint liability loans may corpus to increase the risk loving behavior among the borrowers. They may put in a much riskier projects because the repayment responsibilities had been portioned out among the group member. The building of this attitude potentially invites the free-riders (Gine et al. (2010) Fischer (2010) Barboni et al. (2012)). There have been a number of factors addressed in the literature which could involve the repayment behavior of the individuals positively. Such as monitoring either by the lender or by the group members, peer pressure and peer sanctioning, social affiliations among the group members, opportunity for future loans, group size and lower gradation of interest rates (Floro and Yotopoulos, 1991 , Wydick, 1996, Wydick, 1999).Gin and Karlan (2010) conducted randomized field experiments in the Philippines over a point of three years found that group liability bear on the development and advancement of the microfinance program exerting extreme social pressure on the group members, resulting in discouraging the good imparting clients to adopt. They likewise did not notice any difference in repayment rates for both individual liability and group liability cases.Ghattak and Guinnane (1999) has given a comprehensive analysis on the effect of screening, monitoring and enforcement in group lending. They also observed that the lenders cost of group screening, monitoring and enforcement can be reduced if they follow the group liability strategy. It has also been argued that in a group or joint liability cases where the default or failure to repay the loan will affect all the group members, including the defaulting member (as everyone in the group has to pay back the loan) and the wh ole group will stand disqualified for the future acceptance will encourage the group members to monitor each other. In this way, the group lending has the potential to increase the repayment rates. However, it has been viewed that even in the group lending case the monitoring and enforcement through imposition of penalties are costly, but at the same time effective in reducing the lenders risk, due to shifting of responsibility on to the group members (Stiglitz, 1990 Varian, 1990).The researchers have consistently argued that the controls or restrictions like peer monitoring by the group members, restriction on hike loan payment to the defaulter, social pressure from community through close knit social ties and effective monitoring by the MFIs on the individual as well as group borrowers could potentially increase the chances of loan repayment (Abbink et al., 2006a Gine and Karlan, 2010 Cassar et al., 2007 Karlan, 2007). In a recent study by Al-Azzam et al., (2012), inferred that peer pressure on the fellow counterpart within a group could result in a higher rate of payment.1 For example, Armendariz , 1999 and Rai and Sjostrom, 2004.2 See Section 3.2 for details.

The Problems with Fracking Essay -- Environmentalism, Human Health

No Fracking WayImagine a world where fresh and clear wet was a luxury. Imagine water so polluted with chemicals that every plant it comes into contact with dies. As the trees begin to die, oxygen levels drop. As the vegetation dies, wildlife begins to die out. The polluted water which flows through the ground into wells causes arcsecond contamination. As the water flows out of the sink, one can strike a match and light the liquid on fire. Showering in these chemicals is out of the question. Fresh water has become a comfort, rather than a given. Could planet Earth survive this existence? If hydraulic fracturing, otherwise known as fracking, were deemed legal, this question may be put to the test. Fracking is a process in which chemicals, sand and water are used in high volumes to fracture feature-bearing layers of rock (Dolesh 2). As the rock breaks, raw(a) gas is released and then collected to be used as energy. The United States is currently sitting on a gold mine of natural ga s which could stimulate our ever declining economy. The question is what price are we willing to pay for a temporary fix? Fracking is a dangerous process that should be deemed under-the-counter due to its harmful short and long-term environmental effects.Before one can see the devastating effects of fracking, one must first conceive how fracking works. As previously stated, the main intent of hydro-fracking is to access and harvest natural gas that lies below the surface of the Earth. Having formed over 400 million age ago by the collision of tectonic plates (Marsa 3), the Marcellus Shale plays host to a gold mine of natural gas, which is currently at the center of the fracking debate in the northeasterly region of the United States. Unfortunately, access... ...er, Cyril Josh. Fracking Up New York State Continues The Debate Over Gas Extraction Process. New York Amsterdam News (2011) 4. Academic Search Complete. Web. 7 Nov. 2011.Dolesh, Richard Fracktured Parks. Parks & Recreatio n 46.6 (2011) 56-61. Academic Search Complete. Web. 4 Nov. 2011.Marsa, Linda. Fracking Nation. Discover 32.4 (2011) 62-70. Academic Search Complete. Web. 4 Nov. 2011.Morriss III, James C., and Christopher D. Smith. The Shales And Shale-Nots Environmental Regulation Of Natural Gas Development. (Cover Story). elan vital Litigation Journal 9.4 (2010) 1-23. Academic Search Complete. Web. 18 Nov. 2011.Peltier, Robert. Fracking Problems. Power 155.8 (2011) 6. Academic Search Complete. Web. 18 Nov. 2011.Rahman, Hashim. New York Puts Fracking On Hold. Planning 77.2 (2011) 4. Academic Search Complete. Web. 4 Nov. 2011.

The Apollo 11 Space Flight: Man Explores the Moon and Gains Perspectiv

The 1960s brought cultural transformation through outbreaks of violence and contention. The Love and Peace slogan led to a bloody fear of War and Hate. It was an era of stand and revolt. The decade began with the assassinations of John F. Kennedy and Martin Luther King Jr., escalated with the viciousness of Vietnam, and ended with the suspicion of Watergate. And somewhere in the terror of freedom, we saw two Americans walk on the moon. It was while perfect(a) at that crystalline sphere hovering above us that we pondered the scope of our opportunity. On that warm summer night it was a miracle of technology, a step into a revolutionary world, a celebrated triumph. We eng epochd in a political race to the moon against the Communists with a democratic pride that launched us to a new age of scientific exploration. They were footsteps that would be talked about for centuries bringing information that would influence us for decades. Americas Race for the moon Following the Atomic Bomb o f World War II, the linked States was a recognized Superpower, the technological king of advancement. Through our new Elvis albums and poodle skirts, we were enjoying the satisfaction of being the winning team. However, in 1957, our pride was pierced when intelligence hit that Russia had successfully launched Sputnik, the first artificial satellite to circle the dry land. As President Kennedy said, We are behind and will be for a period in the future (Sullivan 142). We were no longer the superior champions we once were. The Soviet Union seemed unstoppable by 1961 Russian Major Yuri Gagarin became the first man to orbit the earth in a spaceship. Less than two months later, the United States publicly announced their 20 billion dollar space program, Project... ...s. By viewing the Earth as a whole, we discovered truths about humanity that sparked a new perspective of thought and understanding for our generation and the generations to come. We touched the face of another world, and became people without limits (Chaikin ix). plant Cited Chaikin, Andrew. A Man on the Moon The Voyages of the Apollo Astronauts. New York Penguin Books, 1994. Folger, Tim, Sarah Richardson, and Carl Zimmer. Remembering Apollo. Discover July 1994 38-58. Spirit of Apollo A Collection of Reflective Interviews. AIAA (American Institute of Aeronautics and Astronautics, 1989. Sullivan, Walter, ed. Americas Race for the Moon The New York Times Story of Apollo. New York Random House Publishers, 1962. Wilford, John Noble. We Reach the Moon the New York Times story of Mans Greatest Adventure. New York Bantum Books, 1969.

Drug Use Essay -- essays research papers

Trends in dose use among youth are indirectly attributable to trends in society. Although drugs have always been around in one form or another, their early influences on society trace back to just before the 1930s. marihuana was a popular drug among Mexican laborers, jazz musicians, and so-called beatniks. Then after major social changes that took place in 1930, "The government cracked down on marijuana use." "In 1937, the Marijuana Tax Actmade the use and sale of marijuana without a tax stamp federal offenses. This unprecedented event prompted law enforcement officers to view recreational users. Some observers speculate that passage of the law resulted from strong anti-Mexican sentiment in the Southwest and from the political power of federal Commissioner of Narcotics Harry Anslinger, who reigned from 1930-1962 and was strongly anti-drugs." ( glazer ? ) Thirty years later a counter culture emerged with strong anti-war sentiments and a disdain for establishment. T he 1960s were a time of sweeping change and events much(prenominal) as the Vietnam war had caused many young Americans to lose faith in authority. "Grass became an emblem of a generation challenging grownups political and social conventions. Marijuana cigarettes, or joints, were widely used at demonstrations protesting the Vietnam War and at the seminal Woodstock music festival." ( Glazer ? ). The revolution would be televised. With youth drug culture befitting widespread and g...

Jay Gatsby is a Sympathetic Character in Fitzgeralds Great Gatsby Essa

In F. Scott Fitzgeralds The Great Gatsby, Jay Gatsby provides the reader with a unique outlook on the life of the newly rich. Gatsby is an enigma and a subject of great curiosity, furthermore, he is content with a lot in life until he strives too hard. His obsession with wealth, his lonely life and his delusion allow the reader to sympathize with him. Initially, Gatsby stirs up sympathetic feelings because of his obsession with wealth. Ever since meeting Dan Cody, his fascination for wealth has increased dramatically. He even uses illegal unmoral methods to obtain hefty amounts of wealth to spend on buying a house with Marie Antoinette music- retinue, Restoration Salons, dressing rooms and poolrooms, and bath rooms with sunken baths. (88) His wardrobe is just as sensational with shirts of sheer linen and thick silk and fine fennel. (89) Gatsby buys such posh items to impress Daisy but to him, Daisy herself is a image of wealth. Jay remarks, Daisys voice is full of money. (115). For him, Daisy is the one who is High in a white palace the kings daughter, the golden gir...