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Active risk management and loan contract terms: Evidence from rated microfinance institutions

  • Tchakoute-Tchuigoua, Hubert

The aim of this article is to test the relationship among organizational architecture, joint liabilities contracts, and loan conditions. Based on a sample of 135 MFIs rated between 2003 and 2008, the study shows that solidarity lending and a decentralized credit decision have no significant influence on loan conditions. Being a village bank lender is significantly associated with higher interest rates charged, higher outreach, lower depth of outreach, and higher transaction costs. Results seem to highlight the existence of a trade-off between outreach and the average loan size per borrower when MFIs decentralize credit decisions or establish joint liability contracts.

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Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 52 (2012)
Issue (Month): 4 ()
Pages: 427-437

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Handle: RePEc:eee:quaeco:v:52:y:2012:i:4:p:427-437
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620167

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