Abstract
We examine micro-finance institutions (MFI) group processes simulating potential default by members, often the tipping point of crises. Using structural equation methods to develop measurement models and experimental methodology to test causal effects of economic and psychological threats we effectively capture the risks perceived by individual borrowers. We defined these threats in terms of a given financial loss and reputation loss. The results show that members make the subtle distinction between different types of peer pressure and joint liability. We also show that psychological threats perceived by borrowers are key to understanding MFI group processes, especially as triggers to a repayment crisis.
Acknowledgements
The guidance of Prof Ramadhar Singh, Indian Institute of Management, Bangalore in developing the social psychological framework, design, and execution of the experiment, is sincerely acknowledged.
Disclosure statement
No potential conflict of interest was reported by the authors.
Supplementary Materials
Supplementary Materials are available for this article which can be accessed via the online version of this journal available at https://doi.org/10.1080/00220388.2018.1539475.