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What Drives A Long-Term Relationship In Microcredit? Insights from a Cambodian Microfinance Institution

Working Paper No. 91 Centre for Accounting, Governance and Taxation Research School of Accounting and Commercial Law Victoria University of Wellington

Posted: 14 Apr 2012 Last revised: 14 Jan 2016

Alberto Lanzavecchia

University of Padova, Italy

Luminita Enache

Tuck School of Business at Dartmouth

Date Written: March 2013

Abstract

This article examines the determinants of the nominal value of loans in microcredit and the factors that drive long-term relationship banking. The dataset is drawn from primary data gathered from 216 randomly selected borrowers in a Cambodian microfinance institution. Analysis is performed using an OLS regression model.

The results confirm positive and significant impacts of real estate assets and loan purposes on the amount borrowed and a negative impact of being single as a civil status. Long-term relationships are positively affected by: age of borrower and purpose of loan; and negatively affected by female gender.

Contrary to general belief that microcredit is targeted to the “poorest of the poor”, a new market segment in microcredit was discovered within which MFI might target low-income/asset backed clients, granting loans on a “sustainable” basis, by applying the fundamental criteria of commercial banking: assessing credit worthiness and loss given default.

Keywords: microcredit, collateral, loan size, Relationship banking, Cambodia

JEL Classification: G29, O16, I30

Suggested Citation

Lanzavecchia, Alberto and Enache, Luminita, What Drives A Long-Term Relationship In Microcredit? Insights from a Cambodian Microfinance Institution (March 2013). Working Paper No. 91 Centre for Accounting, Governance and Taxation Research School of Accounting and Commercial Law Victoria University of Wellington. Available at SSRN: https://ssrn.com/abstract=2039668 or http://dx.doi.org/10.2139/ssrn.2039668

Alberto Lanzavecchia

University of Padova, Italy ( email )

Via del Santo, 33
Padova, PD 35123
Italy
+39 049 8274060 (Phone)
+39 178 2208411 (Fax)

Luminita Enache (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States
6037297148 (Phone)

HOME PAGE: http://https://www.tuck.dartmouth.edu/faculty/faculty-directory/luminita-enache

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