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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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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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  • Ulrike Vogelgesang, 2001. "Microfinance in Times of Crisis: The Effects of Competition, Rising Indebtedness, and Economic Crisis on Repayment Behavior," GK working paper series 2001-06, Post Graduate Programme "Allocation on Financial Markets", University of Mannheim, revised Nov 2001.
  • Handle: RePEc:xrs:gkwopa:2001-06
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    More about this item

    Keywords

    Microfinance; Arrears Rates; Over-indebtedness; Credit Scoring.;

    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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