To the rescue!

Hoque, Mohammad Ziaul

doi:10.2104/mbr06025

Cited by 1 publication

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“…Prior studies, such as Greenbaum et al (2019), Hoque (2010), Coyle (2000), Özdemir and Boran (2004), Mokhtar et al (2012) have shown that loan default may be a result of borrowers' unwillingness and/or inability to repay. These results have reflected the importance of initial screening of borrowers' ability and commitment and the group composition before granting the loans (Nawai & Shariff, 2010).…”

Section: Introductionmentioning

confidence: 99%

Kinship, gender and social links impact on micro group lending defaults

et al. 2023

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Joint liability aspires to improve micro-loan performance through the support of, and pressure from, the group borrowers. This paper examines how the group composition, in terms of the mixture of kinship (Family) ties and social (Friends and Neighbours) ties among the borrowers, affects the default rates. Using binary logistics regression and three machine learning models, responses from 507 group micro-loan borrowers from four major Moroccan cities were analysed. The results show that the stronger the family and kinship ties are within a loan group, the higher is the default rate. On the contrary, the stronger the social ties are among the group, the lower is the default rate.Other key findings include that the diversion of fund usage from investment to consumption is not found to significantly cause default. Also, loan default can be a consequence of borrowers' strategic choice rather than financial distress.As compared to the female members, male borrowers are found to be causing higher default rates. Interestingly, the gender-related default rates are lower when more of the male borrowers are only socially related. Finally, group size is found to be positively associated with default. Our findings can help microfinance institutions refine their lending policies and guidance on groups' composition and size to reduce default rates.

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Section: Introductionmentioning

confidence: 99%