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Loan Defaults In Microfinance - Forewarned Is Forearmed

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  • Hering, Imke
  • Mußhoff, Oliver

Abstract

Based on a rich dataset of an Azerbaijani microfinance institution, we analyze what a lender can pre-determine from own collected repayment records on clients and how lending conditions are adjusted for the knowledge gains. At the same time, the repayment performances and lending policies between agricultural and non-agricultural clients are differentiated. Our results confirm a positive relationship between previous delays and recidivism, which is even enhanced by the severity of the previous overdue payment. With respect to consequences of previous delay, we find that the borrower faces an increase in loan volume rationing in the subsequent loan. All in all, we state that banks’ internal repayment records can contribute to the customer risk assessment.

Suggested Citation

  • Hering, Imke & Mußhoff, Oliver, 2016. "Loan Defaults In Microfinance - Forewarned Is Forearmed," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244780, German Association of Agricultural Economists (GEWISOLA).
    • Handle: RePEc:ags:gewi16:244780
    DOI: 10.22004/ag.econ.244780
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    Keywords

    Agricultural Finance; Community/Rural/Urban Development; International Development;
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