Determinants of loan repayment performance among borrowers of microfinance institutions: Evidence from India

Seyedmehrdad Mirpourian, Andrea Caragliu, Giorgio Di Maio, Paolo Landoni and Emanuele Rusinà
Authors registered in the RePEc Author Service: Mehrdad Mirpourian

World Development Perspectives, 2016, vol. 1, issue C, 49-52

Abstract: A better understanding of loan repayment behavior of borrowers can contribute to the development of microfinance. This paper investigates the repayment performance of borrowers of a nonprofit Indian microfinance institution, the Indian Institute for Mother and Child – IIMC, using a novel data set. We collected raw data on more than 1600 borrowers, covering a period of more than three years. The data collection focused on the installments of those borrowers who at first received a loan lower than the loan limit, but then reached the loan limit within the time span considered. The final sample for the empirical analyses is homogeneous in terms of borrowers’ characteristics and includes the installments of 373 loans. We focus on a relatively neglected issue in the microcredit literature, viz. the motivation of the borrower for receiving future loans. In addition to borrowers’ characteristics, we analyze the motivational issues that may influence the probability that the loan is fully or partially repaid, and the time horizon over which it is repaid. Empirical results show that the repayment rate improves as borrowers get closer to the loan limit, which is the maximum available loan. In other words, motivation for reaching the maximum loan level is positively associated to the repayment performance.

Keywords: Microfinance; Loan repayment; Loan limit; Loan size; India (search for similar items in EconPapers)
JEL-codes: G21 G23 O12 R11 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wodepe:v:1:y:2016:i:c:p:49-52

DOI: 10.1016/j.wdp.2016.06.002

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