Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Competition, Multiple Borrowing and Over-Indebtedness in Microfinance:An Empirical Investigation


Affiliations
1 Amrita School of Business, Coimbatore, India
2 XLRI Xavier School of Management, Jamshedpur, India
     

   Subscribe/Renew Journal


Of late, there is an active debate among the practice and policy circles about the risk of indebtedness among the borrowers created by micro-lenders. This debate has come up in the light of many crises the industry has faced in the recent past in many parts of the world which are active microfinance markets. Among many causes fuelling the crisis, multiple borrowing and over-indebtedness are reported to have played an active role. In this context, this paper is an attempt to explore the role of competition in triggering multiple borrowing and over indebtedness among the borrowing population. Based on a unique primary data set collected from an active microfinance market as a part of an ongoing study, we find that there is a very high incidence of multiple source borrowing. Further, all indicators of borrower indebtedness measured as ratios of income as well as liquid assets of the borrowers were found to be positively and significantly associated with competition in the microfinance market, implying the need for strong policy interventions in regulating the market.

Keywords

Microfinance, Multiple Borrowing, Indebtedness.
User
Subscription Login to verify subscription
Notifications
Font Size

Abstract Views: 360

PDF Views: 0




  • Competition, Multiple Borrowing and Over-Indebtedness in Microfinance:An Empirical Investigation

Abstract Views: 360  |  PDF Views: 0

Authors

Sunil Puliyakot
Amrita School of Business, Coimbatore, India
H. K. Pradhan
XLRI Xavier School of Management, Jamshedpur, India

Abstract


Of late, there is an active debate among the practice and policy circles about the risk of indebtedness among the borrowers created by micro-lenders. This debate has come up in the light of many crises the industry has faced in the recent past in many parts of the world which are active microfinance markets. Among many causes fuelling the crisis, multiple borrowing and over-indebtedness are reported to have played an active role. In this context, this paper is an attempt to explore the role of competition in triggering multiple borrowing and over indebtedness among the borrowing population. Based on a unique primary data set collected from an active microfinance market as a part of an ongoing study, we find that there is a very high incidence of multiple source borrowing. Further, all indicators of borrower indebtedness measured as ratios of income as well as liquid assets of the borrowers were found to be positively and significantly associated with competition in the microfinance market, implying the need for strong policy interventions in regulating the market.

Keywords


Microfinance, Multiple Borrowing, Indebtedness.