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

Abstract

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

Ayayi, Ayi Gavriel, 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 (2009). Economics of Transition, pp. 1-36, 2011, Available at SSRN: https://ssrn.com/abstract=1954052

Ayi Gavriel Ayayi (Contact Author)

Université du Québec ( email )

3351 Boulevard des Forges C.P 500
Trois Rivières, Québec G9A 5H7
Canada
819 376-5011 ext 3137 (Phone)

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