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Multiple Borrowing, Over-indebtedness, and the Microcredit Addiction Syndrome: Evidence from some African Countries

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  • Isaac Koomson
  • James Atta Peprah

    (UNE Business School, Australia)

Abstract

This paper sets out to provide a detailed transmission mechanism between multiple borrowing and over-indebtedness and to link over-indebtedness to microcredit addiction using desktop review and a focus group discussion with microfinance practitioners from Ghana. We find that addiction to microcredit has both supply- and demand-side causes. Some of the supply-side causes include MFIs’ upscaling intentions, unhealthy competition among MFIs, group lending methodology, compulsory savings, and high interest rates and transactions costs. On the demand side, we found factors such as clients’ inability to save for the future, clients’ satisfaction with MFI products and services and multiple borrowing behaviour. If MFIs do not fail in the delivery of their core mandate regarding poverty reduction, clients’ addiction to micro-credit will be reduced substantially.

Suggested Citation

  • Isaac Koomson & James Atta Peprah, 2018. "Multiple Borrowing, Over-indebtedness, and the Microcredit Addiction Syndrome: Evidence from some African Countries," Africagrowth Agenda, Africagrowth Institute, vol. 15(2), pages 4-8.
    • Handle: RePEc:afj:journ2:v:15:y:2018:i:2:p:4-8
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