Over-indebtedness of microfinance clients

Since 2008, MFC has studied drivers and deterrents of client over-indebtedness through annual MFI mapping studies and targeted country studies
Our work reveals worrying trends around the scale of multiple borrowing and cross-borrowing from different financial institutions. The major lessons emerging include:

Key drivers of repayment problems:

  • Number of loans: clients with multiple loans are more likely delay paymentskredyt
  • Loan size: larger loans are more often overdue
  • Repayment phase: loans closer to maturity tend to be repaid with lower discipline
  • High debt load: clients relay later when their monthly repayment is a higher percentage of their monthly disposable income

Key household-level factors preventing over-indebtedness:

Emergency savings: clients who can cover unexpected costs from savings are less likely to default
Remittances income: income received from migrant family members helps to prevent over-indebtedness
MFC recommendations
We developed a set of recommendations for key groups of industry stakeholders around responsible lending practices, transparency and financial education. These recommendations are based on our research in Bosnia-Herzegovina, Kosovo and Kyrgyzstan.

Read this report in English and Russian

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