The Microfinance Review

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Over-indebtedness in Microfinance: An Analysis Based on Behavioural Implications


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1 Rajagiri Business School, Kerala, India
     

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This paper analyses the over-indebtedness of microfinance borrowers from the point of view of one of its behavioural implications in which the borrower is forced to borrow more to meet a loan repayment commitment. The magnitude of overindebtedness is identified with the number of times a borrower has to borrow afresh to keep the loan repayment alive. Based on this measure, this paper observes that the incidence of overindebtedness is fairly widespread among the borrowers, with a representative borrower having borrowed 2.6 times on an average during a 12 months period. Our results show that adverse economic shocks, volatile incomes, borrowing for consumption and borrowing costs from microfinance institutions positively influence over-indebtedness.

Keywords

Microfinance, Over-indebtedness, Default, Repayment.
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  • Over-indebtedness in Microfinance: An Analysis Based on Behavioural Implications

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Authors

Sunil Puliyakot
Rajagiri Business School, Kerala, India

Abstract


This paper analyses the over-indebtedness of microfinance borrowers from the point of view of one of its behavioural implications in which the borrower is forced to borrow more to meet a loan repayment commitment. The magnitude of overindebtedness is identified with the number of times a borrower has to borrow afresh to keep the loan repayment alive. Based on this measure, this paper observes that the incidence of overindebtedness is fairly widespread among the borrowers, with a representative borrower having borrowed 2.6 times on an average during a 12 months period. Our results show that adverse economic shocks, volatile incomes, borrowing for consumption and borrowing costs from microfinance institutions positively influence over-indebtedness.

Keywords


Microfinance, Over-indebtedness, Default, Repayment.

References