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Determinants of Repayment in Microcredit: Evidence from Programs in the United States

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  • Nitin Bhatt

Abstract

Many microcredit programs have been created in the United States in the past decade that replicate design features of their counterparts in the third world. Yet few systematic studies have been carried out to examine what determines these programs' loan repayment performance. We attempt to fill this gap by studying the determinants of loan repayment for four of the oldest group-based microcredit programs in the US. Our findings suggest that these programs are faced with a set of social and institutional environments that are both similar to and different from those faced by their third-world counterparts. On the one hand we find that higher levels of education and proximity to the lending agency increase the chances of loan repayment. Low transaction costs for accessing loans and high borrower-costs in the event of default also enhance loan repayment performance. On the other hand key variables such as gender and homogeneity of borrowers are not significantly related to loan repayment. We conclude by examining the implications of these findings for program design in the US. Copyright Joint Editors and Blackwell Publishers Ltd 2002.

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  • Nitin Bhatt, 2002. "Determinants of Repayment in Microcredit: Evidence from Programs in the United States," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 26(2), pages 360-376, June.
  • Handle: RePEc:bla:ijurrs:v:26:y:2002:i:2:p:360-376
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    Cited by:

    1. Boehe, Dirk Michael & Barin Cruz, Luciano, 2013. "Gender and Microfinance Performance: Why Does the Institutional Context Matter?," World Development, Elsevier, vol. 47(C), pages 121-135.
    2. Suraya Hanim Mokhtar & Gilbert Nartea & Christopher Gan, 2012. "Determinants of microcredit loans repayment problem among microfinance borrowers in Malaysia," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 2(7), pages 33-45, December.
    3. Dorfleitner, G. & Just-Marx, S. & Priberny, C., 2017. "What drives the repayment of agricultural micro loans? Evidence from Nicaragua," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 89-100.
    4. Mohammed Yelwa & S.A.J. Obansa Awe & Emmanuel Omonoyi, 2015. "Informality, Inclusiveness and Economic Growth in Nigeria," International Journal of Management Science and Business Administration, Inovatus Services Ltd., vol. 1(10), pages 33-44, September.
    5. Kajenthiran. K & Achchuthan. S & Ajanthan. A, 2017. "A Quest for Seeking Microcredit among Youth: Evidence from an Emerging Nation in South Asian Region," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 7(2), pages 1-8.
    6. Ibtissem Baklouti, 2013. "Determinants of Microcredit Repayment: The Case of Tunisian Microfinance Bank," African Development Review, African Development Bank, vol. 25(3), pages 370-382, September.
    7. repec:bla:afrdev:v:29:y:2017:i:2:p:249-258 is not listed on IDEAS
    8. Dorfleitner, Gregor & Priberny, Christopher & Schuster, Stephanie & Stoiber, Johannes & Weber, Martina & de Castro, Ivan & Kammler, Julia, 2016. "Description-text related soft information in peer-to-peer lending – Evidence from two leading European platforms," Journal of Banking & Finance, Elsevier, vol. 64(C), pages 169-187.
    9. Sofia Pereira & Paulo Mourao, 2012. "Why does the microcredit borrowing rate differ across countries? A cross-country study," International Journal of Social Economics, Emerald Group Publishing, vol. 39(8), pages 536-550, June.
    10. Cason, Timothy N. & Gangadharan, Lata & Maitra, Pushkar, 2012. "Moral hazard and peer monitoring in a laboratory microfinance experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 192-209.
    11. Kangogo, Daniel & Lagat, Job & Ithinji, Gicuru, 2013. "The Influence of Social Capital Dimensions on Household Participation in Micro-Credit Groups and Loan Repayment Performance in Uasin Gishu County, Kenya," MPRA Paper 48624, University Library of Munich, Germany.
    12. Aggarwal, Raj & Goodell, John W. & Selleck, Lauren J., 2015. "Lending to women in microfinance: Role of social trust," International Business Review, Elsevier, vol. 24(1), pages 55-65.
    13. D'Espallier, Bert & Guérin, Isabelle & Mersland, Roy, 2011. "Women and Repayment in Microfinance: A Global Analysis," World Development, Elsevier, vol. 39(5), pages 758-772, May.
    14. Mutaleb, Md Z. & Baharanyi, Ntam R. & Tackie, Nii O. & Zabawa, Robert, 2014. "An Assessment Of Microlending Programs In The Alabama Black Belt Region," Professional Agricultural Workers Journal (PAWJ), Professional Agricultural Workers Conference, vol. 2(2).
    15. James C. Brau & Gary M. Woller, 2004. "Microfinance: A Comprehensive Review of the Existing Literature," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 9(1), pages 1-28, Spring.

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