The Sacrifices of Micro-Borrowers in Ghana -- A Customer-Protection Perspective on Measuring Over-Indebtedness

Jessica Schicks

Journal of Development Studies, 2013, vol. 49, issue 9, 1238-1255

Abstract: This article measures the over-indebtedness of micro-borrowers. It defines over-indebtedness from a customer-protection perspective, based on the borrowers' sacrifices. We analyse the sacrifices borrowers experience and find that 30 per cent of borrowers are over-indebted. We then test risk management indicators of debt problems as predictors of over-indebtedness. Over-indebtedness is strongly related to delinquency and the debt-to-income ratio but not to debt amounts or to multiple borrowing. Although our model correctly predicts 72.6 per cent of cases, even the best indicators identify only a few over-indebted borrowers. Risk management is not enough to protect customers against over-indebtedness but the industry needs to measure customer experiences directly.

Date: 2013
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Working Paper: The sacrifices of microborrowers in Ghana – A customer-protection perspective on measuring over-indebtedness (2012)
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DOI: 10.1080/00220388.2013.775421

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