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
Date Written: March 2013
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
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