Peer Lending Groups and Success: A Case Study of
Vol. Volume 8, Number 1 April/2003
Nazli Kibria, Susan Lee, Ramona Olvera
Microenterprise programs seek to encourage small business through the provision of collateral-free loans and other business and training services, typically to economically disadvantaged populations. This paper explores one component of microenterprise programs in the U.S. – the peer lending group. This is a system in which small groups of unrelated individuals work to support and enforce loan giving and repayment. The analysis draws on a case-study of Working Capital, a microenterprise organization based in Massachusetts. Specifically, drawing on in-depth interviews with members of Working Capital peer lending groups as well as program staff, the processes and meanings of successful peer lending groups are explored as they are understood and experienced by those associated with them. The findings suggest that in the context of the U.S., the successful peer lending group is best understood as a place to build credit history, to gain basic business skills, and to develop networks of support. It was also found that the successful peer lending group had important identity benefits for members, giving them a sense of belonging in a community of entrepreneurs.