From a supply gap to a demand gap? The risk and consequences of over-indebting the underbanked
In the past, the microfinance industry focused mainly on growth and outreach. Addressing financial exclusion implied a huge supply gap. Recent over-indebtedness crises in several countries have shown that this gap can turn into over-supply. The industry urgently requires research to understand the magnitude and consequences of this shift. This chapter reveals the broad spectrum of consequences over-indebtedness can have on borrowers and other stakeholders, mainly MFIs. It emphasizes that over-indebtedness consequences reach far beyond the risk management concerns that MFIs and investors have on top of their mind. In a second step the chapter reviews the existing empirical research on microfinance over-indebtedness and examines how prevalent over-indebtedness is in microfinance markets today. It highlights the evidence for over-indebtedness in crisis markets and non-crisis markets, especially when markets mature. Only if the extent of the problem is known and its effects are properly understood, can the microfinance industry develop appropriate measures against over-indebtedness and adapt to the challenge of oversupply.
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| Length: | 24 p. |
| Date of creation: | Oct 2011 |
| Date of revision: | |
| Publication status: | Published by: |
| Handle: | RePEc:sol:wpaper:2013/99192 |
| Contact details of provider: | Postal: CP114/03, 42 avenue F.D. Roosevelt, 1050 Bruxelles Phone: +32 (0)2 650.48.64 Fax: +32 (0)2 650.41.88 Web page: http://difusion.ulb.ac.be Email: More information through EDIRC
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