Lending Models and Microfinance Institutions

by Paul Jones Introduction This paper will compare and contrast the group lending and individual lending models used by Microfinance Institutions, which first emerged in the later decades of the 20th century, and discuss the situations where one model may be preferable to the other. The academic literature on this topic is growing, and there are many subtleties to consider when comparing the pros and cons of group versus individual lending. An in-depth analysis of this complex topic is well beyond the scope of this essay. Rather, a high level synopsis will be presented that attempts to compress the salient points. The concept of crowdfunding is also discussed, and how it relates to the group and individual lending models frequently

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