Are Microcredit Borrowers in Bangladesh Over-indebted ?
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World Bank, Washington, DC
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Microcredit programs in Bangladesh have
experienced spectacular growth in recent years, with a
growing number of borrowers availing credit from multiple
microcredit agencies. There is a growing concern that if
there are not sufficient returns to borrowing from
microfinance institutions (MFIS), some borrowers might be
taking loans that they will not be able to repay. A
household may be considered over-indebted, for example, if
its debt liability exceeds 40 percent of its income or
assets. Using a long panel of household survey data from
Bangladesh, the paper finds that some 26 percent of
microcredit borrowers are over-indebted on this measure
versus 22 percent of non-microcredit borrowers. Econometric
analysis suggests that both MFI competition and multiple
borrowing raise indebtedness. However, repeated borrowing,
while it affects short-term liability adversely, does affect
the long-term debt-asset ratio favorably. That is, repeated
borrowing helps increase assets more than debt over time.
Microcredit borrowers in Bangladesh are thus not necessarily
over-indebted. But when borrowing is seen as protection
against shocks such as floods even at the cost of being
indebted, MFIs may offer micro-insurance schemes to
safeguard borrowers against economic shocks.
Palabras clave
ACCESS TO CREDIT, ADVERSE EFFECT, ADVERSE SHOCKS, AGRICULTURAL BANKS, AGRICULTURAL DEVELOPMENT BANKS, ARREARS, ASSET RATIO, ASSET VALUES, BANK OF ENGLAND, BANK POLICY, BANKRUPT, BIDS, BORROWER, BUFFER, COMMERCIAL BANK, COMMERCIAL BANKS, CONSUMER CREDIT, CONSUMER GOODS, CONSUMER PROTECTION, CONSUMPTION SMOOTHING, CONTROL VARIABLES, CREDIBILITY, CREDIT BUREAUS, CREDIT CONSTRAINT, CREDIT CONSTRAINTS, CREDIT LIMIT, CREDIT LIMITS, CREDIT MARKETS, CREDIT PROGRAMS, CREDIT RISKS, CREDITWORTHINESS, DEBT, DEBT CONTRACTS, DEBT LIABILITY, DEBT PAYMENT, DEBT PROBLEMS, DEBT RATIOS, DEBT SERVICE, DEBT SERVICING, DEBT SERVICING COSTS, DEBTS, DEFAULT CASES, DEFAULTS, DEMAND FOR CREDIT, DEMAND-SIDE FACTORS, DEPENDENCY RATIO, DEPENDENT, DEPENDENT VARIABLE, DEPENDENTS, DEPOSITS, DEPRESSIONS, DESCRIPTIVE STATISTICS, DEVELOPING COUNTRIES, DISBURSEMENT, DISBURSEMENTS, ECONOMIC CRISIS, ECONOMIC SHOCKS, ENTREPRENEURSHIP, ENVIRONMENTAL FACTORS, EXPENDITURES, EXPLANATORY VARIABLES, EXPOSURE, EXTERNAL FACTORS, FEDERAL RESERVE, FINANCIAL DISTRESS, FINANCIAL INSTITUTIONS, FINANCIAL SERVICES, FIXED EFFECTS, FOREIGN CURRENCY, FOREIGN CURRENCY MARKETS, GOVERNMENT POLICIES, HOLDING, HOUSEHOLD DEBT, HOUSEHOLD DEBTS, HOUSEHOLD INCOME, INCIDENCE OF INDEBTEDNESS, INCOME GENERATION, INCOME-GENERATING ACTIVITIES, INCOMES, INDEBTED, INDEBTED HOUSEHOLDS, INDEBTEDNESS, INDIVIDUAL ACCOUNTS, INFORMAL LOANS, INSOLVENCY, INSOLVENT, INSTITUTIONAL ENVIRONMENT, INSTRUMENT, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK, INVESTMENT OPPORTUNITY, IRRESPONSIBLE BORROWING, JUDGMENT, JUDICIAL EFFICIENCY, LAND ASSET, LAND ASSETS, LEGAL ENVIRONMENT, LENDER, LENDERS, LEVEL OF INDEBTEDNESS, LEVEL OF REPAYMENT, LIABILITY, LIQUIDITY, LIQUIDITY PROBLEMS, LOAN, LOAN AGREEMENTS, LOAN AMOUNT, LOAN APPROVALS, LOAN CONTRACTS, LOAN MATURITY, LOAN PAYMENT, LOAN PORTFOLIO, LOAN PORTFOLIOS, LONG-TERM BORROWING, LONG-TERM DEBT, MARKET INFORMATION, MATURITIES, MICRO CREDIT, MICRO-CREDIT, MICRO-INSURANCE, MICROCREDIT, MICROFINANCE, MICROFINANCE INSTITUTION, MICROFINANCE INSTITUTIONS, NATURAL DISASTERS, NET ASSETS, NET SAVINGS, OUTSTANDING LOANS, PAYMENT OBLIGATIONS, PAYMENT SERVICES, PORTFOLIO GROWTH, POVERTY ALLEVIATION, POVERTY REDUCTION, PRIVATE INVESTMENT, PRODUCTIVE INVESTMENTS, RATES OF INTEREST, REGULATORY REFORM, REORGANIZATION, REPAYMENT, REPAYMENT BEHAVIOR, REPAYMENT CAPACITY, REPAYMENT RATES, REPAYMENTS, RETURN, RETURNS, RISK MANAGEMENT, RISK MANAGEMENT STRATEGIES, SEIZURE, SEIZURE OF ASSETS, SHOCKS TO INCOME, SHORT-TERM LIABILITY, STANDARD DEVIATIONS, STOCKS, SUPPLY OF CREDIT, SUPPLY SIDE, SUPPLY SIDES, SUPPLY-SIDE, SUSTAINABLE DEVELOPMENT, UNSECURED DEBT, VALUE OF ASSETS, WAGE RATES, poverty