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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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  • Vogelgesang, Ulrike, 2003. "Microfinance in Times of Crisis: The Effects of Competition, Rising Indebtedness, and Economic Crisis on Repayment Behavior," World Development, Elsevier, vol. 31(12), pages 2085-2114, December.
  • Handle: RePEc:eee:wdevel:v:31:y:2003:i:12:p:2085-2114
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    Cited by:

    1. Guha, Brishti & Chowdhury, Prabal Roy, 2013. "Micro-finance competition: Motivated micro-lenders, double-dipping and default," Journal of Development Economics, Elsevier, vol. 105(C), pages 86-102.
    2. Leonardo Becchetti & Stefano Castriota & Pierluigi Conzo, 2012. "Bank strategies in catastrophe settings: empirical evidence and policy suggestions," Econometica Working Papers wp43, Econometica.
    3. Guha, Samapti, 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.
    4. 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.
    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. 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. Jessica Schicks, 2013. "The Sacrifices of Micro-Borrowers in Ghana -- A Customer-Protection Perspective on Measuring Over-Indebtedness," Journal of Development Studies, Taylor & Francis Journals, vol. 49(9), pages 1238-1255, September.
    8. Schicks, Jessica, 2014. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," World Development, Elsevier, vol. 54(C), pages 301-324.
    9. Kumar Kar, Ashim & Bali Swain, Ranjula, 2014. "Competition, performance and portfolio quality in microfinance markets," Working Paper Series 2014:8, Uppsala University, Department of Economics.
    10. Carlos Serrano-Cinca & Begoña Gutiérrez-Nieto & Nydia M. Reyes, 2013. "A Social Approach to Microfinance Credit Scoring," Working Papers CEB 13-013, ULB -- Universite Libre de Bruxelles.
    11. Dorfleitner, Gregor & Oswald, Eva-Maria, 2016. "Repayment behavior in peer-to-peer microfinancing: Empirical evidence from Kiva," Review of Financial Economics, Elsevier, vol. 30(C), pages 45-59.
    12. Salim, Mir M., 2013. "Revealed objective functions of Microfinance Institutions: Evidence from Bangladesh," Journal of Development Economics, Elsevier, vol. 104(C), pages 34-55.
    13. Tchakoute Tchuigoua, Hubert, 2016. "Buffer capital in microfinance institutions," Journal of Business Research, Elsevier, vol. 69(9), pages 3523-3537.
    14. 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.
    15. Annabel Vanroose, 2014. "Factors that explain the regional expansion of microfinance institutions in Peru," Working Papers CEB 14-030, ULB -- Universite Libre de Bruxelles.
    16. Müller, Kirsten & Musshoff, Oliver & Weber, Ron, 2014. "The more the better? How collateral levels affect credit risk in agricultural microfinance," DARE Discussion Papers 1402, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    17. Mersland, Roy, 2009. "The Cost of Ownership in Microfinance Organizations," World Development, Elsevier, vol. 37(2), pages 469-478, February.
    18. 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.
    19. repec:eee:wdevel:v:98:y:2017:i:c:p:338-350 is not listed on IDEAS
    20. Römer, Ulf & Weber, Ron & Mußhoff, Oliver & Turvey, Calcum G., 2017. "Truth and consequences: Bogus pipeline experiment in informal small business lending," DARE Discussion Papers 1702, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    21. Sk. Mahmudul Alam, Mahmud, 2012. "Does Microcredit Create Over-indebtedness?," MPRA Paper 39124, University Library of Munich, Germany.
    22. Shapiro, D.A., 2015. "Microfinance and dynamic incentives," Journal of Development Economics, Elsevier, vol. 115(C), pages 73-84.

    More about this item

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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