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Economic Quarterly

Fall 1997

Group Lending and Financial Intermediation: An Example

Edward S. Prescott

Uncollateralized lending to jointly liable groups of individuals has proven to be a successful way of delivering credit to the poor in less-developed countries. Currently, such financial arrangements are being tried in the United States. The author develops a financial intermediation model in order to analyze the portability of group lending to the United States and the connection between group lending and the rest of the financial intermediation sector.

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