How flexible repayment schedules affect credit risk in agricultural microfinance

Arbeitspapier

Using a unique dataset of a commercial microfinance institution in Madagascar, this paper investigates how the provision of microfinance loans with (in)flexible repayment schedules affects loan delinquencies of agricultural borrowers. Flexible repayment schedules allow a redistribution of principal payments during periods with low agricultural returns to periods when agricultural returns are high. We develop a theoretical framework and apply and estimate an econometric model for the loan repayment behavior of agricultural microborrowers with seasonal and non-seasonal production types. Our results reveal that delinquencies of non-seasonal farmers and seasonal farmers with inflexible repayment schedules are not significantly different from those of non-farmers. Furthermore, we find that seasonal farmers with flexible repayment schedules show significantly higher delinquencies than non-farmers in low delinquency categories, but we also find that this effect disappears in the highest delinquency category.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeitrag ; No. 1404

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Agricultural Finance
• Subject: Agricultural Credit ; Borrowing ; Financial Risk ; Loan Repayment ; Microfinance ; Seasonality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Weber, Ron ; Mußhoff, Oliver ; Petrick, Martin
• Event: Veröffentlichung
• (who): Georg-August-Universität Göttingen, Department für Agrarökonomie und Rurale Entwicklung (DARE)
• (where): Göttingen
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/96512