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Microfinance in Times of Crisis: The Effects of Competition, Rising Indebtedness, and Economic Crisis on Repayment Behavior

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  • Vogelgesang, Ulrike

Abstract

This paper analyzes repayment determinants for loans from Caja Los Andes, a Bolivian microlender. The analysis focuses on the influence of recent changes in the Bolivian microfinance market. In particular, we examine the effects of the rapidly growing supply of funds for micro-loans, the increasing competition, a rising level of indebtedness among micro-entrepreneurs, and the recent economic crisis. Our results show a two-fold influence structure of competition and indebtedness. Firstly, clients with loans from multiple sources at the same time are found to be more likely to default than others. Secondly, clients with given characteristics have an overall better repayment behavior in areas with higher competition and a higher supply of micro-loans.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 31 (2003)
Issue (Month): 12 (December)
Pages: 2085-2114

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Handle: RePEc:eee:wdevel:v:31:y:2003:i:12:p:2085-2114

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Cited by:
  1. Leonardo Becchetti & Stefano Castriota & Pierluigi Conzo, 2012. "Bank Strategies in Catastrophe Settings: Empirical Evidence and Policy Suggestions," CSEF Working Papers 324, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. Brishti Guha & Prabal Roy Chowdhury, 2013. "Micro-finance Competition: Motivated Micro-lenders, Double-dipping and Default," Working Papers 01-2013, Singapore Management University, School of Economics.
  3. Jessica Schicks, 2012. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," Working Papers CEB 12-017, ULB -- Universite Libre de Bruxelles.
  4. Mersland, Roy, 2009. "The Cost of Ownership in Microfinance Organizations," World Development, Elsevier, vol. 37(2), pages 469-478, February.
  5. Weber, Ron & Mußhoff, Oliver & Petrick, Martin, 2014. "How flexible repayment schedules affect credit risk in agricultural microfinance," DARE Discussion Papers 1404, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
  6. Samapti Guha, 2007. "Impact of competition on microfinance beneficiaries: evidence from India," LSE Research Online Documents on Economics 25188, London School of Economics and Political Science, LSE Library.
  7. Sk. Mahmudul Alam, Mahmud, 2012. "Does Microcredit Create Over-indebtedness?," MPRA Paper 39124, University Library of Munich, Germany.
  8. Khandker, Shahidur R. & Faruqee, Rashid & Samad, Hussain A., 2013. "Are microcredit borrowers in Bangladesh over-indebted ?," Policy Research Working Paper Series 6574, The World Bank.
  9. Salim, Mir M., 2013. "Revealed objective functions of Microfinance Institutions: Evidence from Bangladesh," Journal of Development Economics, Elsevier, vol. 104(C), pages 34-55.
  10. Jessica Schicks, 2011. "From a supply gap to a demand gap? The risk and consequences of over-indebting the underbanked," Working Papers CEB 11-046, ULB -- Universite Libre de Bruxelles.

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