Question

a) Distinguish between individual lending contracts and group lending contracts.
b) Discuss how group lending mitigates adverse selection and moral hazard problems.
          
c) Explain four limitations of group lending.     
d) “Formal service providers in the financial sector focus more on men than women.”
Justify the view that microfinance institutions should focus on women.

Answer 1

Sr No	Individual Lending Contracts	Group Lending Contracts
1	The lending is done to individual and liability is also of the borrower and co-borrower or gaurantor	The lending is done to all the individual in the group but liability is of all the group member
2	The liability is limited to the loan availed by the individual	The liability is of one customer is total taken by group thus if a group of 5 takes a loan of 10,000 then every individual have liability of 50000
3	The co-borrower and gaurantor are liable for laon if a customer does not pay the loan	In addition to co-borrower and gaurantor whole group is liable to pay the loan
4	This type of loan can range from small amounts to very big amounts	This type of loans are generally given is smaller amounts