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Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level

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  • Schicks, Jessica

Abstract

This paper analyzes the over-indebtedness of microborrowers in Ghana from a customer protection perspective. It measures over-indebtedness as a subjective indicator based on loan-related sacrifices that borrowers report. It finds that male microborrowers are more likely to be over-indebted. So are borrowers with adverse economic shocks, low returns on investment, and non-productive loan use. Over-indebtedness is lower for borrowers with good debt-literacy. General financial literacy and numeracy seem insufficient to reduce over-indebtedness. The paper details the relationship of the above factors to the specific sacrifices borrowers make and suggests that policy measures address the full complexity of the over-indebtedness phenomenon.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:wdevel:v:54:y:2014:i:c:p:301-324
    DOI: 10.1016/j.worlddev.2013.08.009
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    More about this item

    Keywords

    microfinance; over-indebtedness; customer protection; sacrifices; Africa; Ghana;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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