The impact of group lending in Northeast Thailand

Much of the literature on group lending focuses an its high repayment rates rather than its goal of promoting borrower welfare. Most studies that attempt to measure the impact of group lending neglect the issues of self-selection and endogenous program placement, thus leading to biased estimates of impact. One reason for this neglect is the lack of data that would allow for identification of impact. This paper surmounts these problems by using data from a quasi-experiment conducted in Northeast Thailand in 1995-1996. Program participants were identified in six control villages 1 year prior to receiving loans. Surveys were then conducted of these "control" members, "treatment" members in eight older program villages, and nonmembers in both types of village. This survey design allows for straightforward estimation of impact. The results indicate that program loans are having little impact although "naive" estimates of impact that fail to account for self selection and endogenous program placement significantly overestimate impact. (C) 1999 Elsevier Science B.V. All rights reserved.