Does Microcredit Create Over-indebtedness?

Sk. Mahmudul Alam, Mahmud (2012): Does Microcredit Create Over-indebtedness?

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Microcredit; Borrowers; Over-indebtedness
• Subjects: H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt ; Debt Management ; Sovereign Debt; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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