IIMS Journal of Management Science
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Nishi Malhotra1 
1 Indian Institute of Management Sambalpur, Basantpur, Odisha, India
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The poor and unorganized women artisans lack the physical collateral, and banks are wary to lend to them due to informational asymmetry regarding their creditworthiness. Social capital in a joint liability group enables the members to borrow from the banks. Due to the joint liability and dynamic incentive of higher credit limits, the members peer monitors each other to ensure access to finance. The research study aims to discuss the role of peer mechanisms in ensuring the success of lending to the poor and marginalized through self-help groups (SHGs) or joint liability groups. Since there is no study that discusses the impact of peer mechanisms on lending through SHGs, this study, for the first time, provides a conceptual framework for peer mechanism and their role in ensuring the sustainability of joint liability groups. This study uses the social constructivist paradigm and the grounded theory method to explain how the peer mechanism that comprises peer selection, peer monitoring and peer enforcement helps to improve the repayment rates under the SHGs linkage program. The data for the study are collected using 25 semi-structured interviews with the members of the SHGs and the heads of the self-help-promoting institutions. The analysis of data highlights that in a group social exchange, social control, social cohesion, sustainability, and social welfare, which emerged as categories after the open coding, are the main sources of peer mechanism. Further focused coding highlighted that mainly network relations, trust, and norms enable sustainability in the SHGs.
Microfinance, self-help groups, peer mechanism
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