Collateral and risk sharing in group lending: evidence from an urban microcredit program

Empirical research on group lending is extensive, but without allowance for collateral to mitigate strategic default. Indeed, lack of credit access has motivated microcredit in rural areas of developing countries, where agents with collateral are very rare. As rural communities have tight-knit hierarchical structures information about borrowers is accessible and enforcement of social sanctions makes collateral superfluous. First, we illustrate in a model how collateral mitigates group default. Second, we study a group lending program in Cotonou, the largest city in Benin with 1.1 million inhabitants. Results show diversification within groups facilitating risk pooling but also increasing expected default costs for safe borrowers. Risky borrowers offset group-default negative spillovers default with collateral, and facilitate credit access to safe borrowers. We find joint liability to be a mechanism for risk sharing in a setting where poor households lack resources for collateral and insurance markets are missing

Contagious Synchronization and Endogenous Network Formation in Financial Networks

When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of the world and a social belief formed from observing the actions of peers. Observing a larger group of peers conveys more information and thus leads to a stronger social belief. Extending the standard model of Bayesian updating in social networks, we show that the probability that banks synchronize their investment strategy on a state non-matching action critically depends on the weighting between private and social belief. This effect is alleviated when banks choose their peers endogenously in a network formation process, internalizing the externalities arising from social learning.Comment: 41 pages, 10 figures, Journal of Banking & Finance 201

Networks as Emergent Structures from Bilateral Collaboration

In this paper we model the formation of innovation networks as they emerge from bilateral actions. The effectiveness of a bilateral collaboration is determined by cognitive, relational and structural embeddedness. Innovation results from the recombination of knowledge held by the partners to the collaboration, and the extent to which agents’ knowledge complement each others is an issue of cognitive embeddedness. Previous collaborations (relational embeddedness) increase the probability of a successful collaboration; as does information gained from common third parties (structural embeddedness). As a result of repeated alliance formation, a network emerges whose properties are studied, together with those of the process of knowledge creation. Two features are central to the innovation process: how agents pool their knowledge resources; and how agents derive information about potential partners. We focus on the interplay between these two dimensions, and find that they both matter. The networks that emerge are not random, but in certain parts of the parameter space have properties of small worlds. (JEL Classification: L14, Z13, O3 Keywords: Networks, Innovation, Network Formation, Knowledge)industrial organization ;

Immigrant women’s entrepreneurship: is there a development model in Italy?

The aim of this paper is to verify if there is a typical enterprise model for the development of immigrant female entrepreneurship in Italy. Based on the literature on the subject, however, it is useful to ask the following research question: “can membership in a national and international network facilitate the development of immigrant female entrepreneurship operating in Italy”? The survey was carried out by submitting a questionnaire to a sample of immigrant women entrepreneurs in the textile and clothing sector based in Italy. The choice fell on this specific economic segment because it represents the third largest sector for the number of female immigrant entrepreneurs (2.271 units) which amounts to 16% of the total number of entrepreneurs operating in the same sector. The percentage of respondents was 35%, with 795 completed questionnaires. The structure of the questionnaire reflects the need to examine the personal features of female entrepreneurs, the organizational aspects and the style of leadership, the task environment in which the enterprise works and the main possible benefits, or obstacles, they might obtain, or face. In addition to the objective of enlarging the literature regarding the management and governance of businesses run by women entrepreneurs, that is quite limited to date, this paper is a contribution to the analysis of a possible development model of women entrepreneurs

New Hampshire University Research and Industry Plan: A Roadmap for Collaboration and Innovation

This University Research and Industry plan for New Hampshire is focused on accelerating innovation-led development in the state by partnering academia’s strengths with the state’s substantial base of existing and emerging advanced industries. These advanced industries are defined by their deep investment and connections to research and development and the high-quality jobs they generate across production, new product development and administrative positions involving skills in science, technology, engineering and math (STEM)

Startup Act for the States

Proposes state policy options for promoting entrepreneurial growth and the "job-creation engines" of start-ups by increasing the supply of entrepreneurs, facilitating the launch and growth of new ventures, and fostering a culture of entrepreneurship

Towards a strategy for workplace learning: Report to HEFCE by CHERI and KPMG

The study, undertaken between March and November 2005 aimed to inform HEFCE thinking on developing a strategy for workplace learning by: exploring the nature, purposes and outcomes of workplace learning; considering workplace learning within the broader relationships between the worlds of work and learning; exploring emerging changes in higher education which may impact on workplace learning in the future; identifying structural issues that currently enable or inhibit workplace learning, and identify future opportunities

Collateral and risk sharing in group lending: evidence from an urban microcredit program

Empirical research on group lending is extensive, but without allowance for collateral to mitigate strategic default. Indeed, lack of credit access has motivated microcredit in rural areas of developing countries, where agents with collateral are very rare. As rural communities have tight-knit hierarchical structures information about borrowers is accessible and enforcement of social sanctions makes collateral superfluous. First, we illustrate in a model how collateral mitigates group default. Second, we study a group lending program in Cotonou, the largest city in Benin with 1.1 million inhabitants. Results show diversification within groups facilitating risk pooling but also increasing expected default costs for safe borrowers. Risky borrowers offset group-default negative spillovers default with collateral, and facilitate credit access to safe borrowers. We find joint liability to be a mechanism for risk sharing in a setting where poor households lack resources for collateral and insurance markets are missing. Keywords; group lending, mutual cosigners, collateral, risk sharing, strategic default, bailout costs

Business fluctuations in a behavioral switching model: Gridlock effects and credit crunch phenomena in financial networks

In this paper we characterize the evolution over time of a credit network in the most general terms as a system of interacting banks and firms operating in a three-sector economy with goods, credit and interbank market. Credit connections change over time via an evolving fitness measure depending from lenders’ supply of liquidity and borrowers’ demand of credit. Moreover, an endogenous learning mechanism allows agents to switch between a loyal or a shopping-around strategy according to their degree of satisfaction. The crucial question we investigate is how financial bubbles and credit-crunch phenomena emerge from the implemented mechanism