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