Credit Risk Assessment in the Microfinance Industry: An Application to a Selected Group of Vietnamese Microﬁnance Institutions and an Extension to East Asian and Paciﬁc Microﬁnance Institutions
Economics of Transition, pp. 1-36, 2011
Posted: 4 Nov 2011 Last revised: 4 Jan 2014
Date Written: 2009
This paper discusses credit risk assessment through conventional and specialized credit evaluation metrics. I ﬁnd that low credit risk is a direct consequence of sound implementation of good governance practices and sustainable ﬁnancial performance through sound qualitative and quantitative risk management tools. Furthermore, I ﬁnd that the depth and breadth of outreach and write-off are by some margin the two most important determinant indicators of a microﬁnance institutions’ (MFI’s) credit risk control. In addition, I demonstrate that there is no signiﬁcant statistical difference in terms of risk management among the different types of MFIs. Results also suggest that constructive regulation to promote MFIs has a nonnegligible impact on the risk assessment of MFIs.
Keywords: Assessing credit risks, microﬁnance industry, microﬁnance institutions, regulation, East Asia and Paciﬁc, Vietnam
JEL Classification: G21, G32, G38
Suggested Citation: Suggested Citation