Does Microcredit Create Over-indebtedness?

Mahmud Sk. Mahmudul Alam

MPRA Paper from University Library of Munich, Germany

Abstract: In the context of the present crisis of microfinance, it is quite common to use the term over-indebtedness among the poor. Coming up with a precise definition of over-indebtedness for research or regulatory purposes is surprisingly a complex challenge. Few of researchers took attempt to define and measure over-indebtedness among microfinance borrowers. Among them Maurer and Pytkowska (2010); Spannuth & Pytkowska (2011) and Schicks (2011) are notable. But their definition and measurement process of over-indebtedness are not unique. Maurer and Pytkowska showed that by taking microcredit, 17% borrowers are over-indebted and 11% borrowers are at risk of becoming over-indebted in Bosnia and Herzegovina. Spannuth & Pytkowska demonstrated that 7% borrowers are insolvent, 4% borrowers are in critical position and 14% are at risk of becoming over-indebted in Kosovo. Schicks displayed that 30% borrowers are over-indebted in Ghana. The endeavor of this paper is to show the real fact whether microcredit creates over-indebtedness among its borrowers or not.

Keywords: Microcredit; Borrowers; Over-indebtedness (search for similar items in EconPapers)
JEL-codes: G21 H63 (search for similar items in EconPapers)
Date: 2012-05-30
New Economics Papers: this item is included in nep-ban, nep-dev and nep-mfd
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