Does Microcredit Create Over-Indebtedness?

21 Pages Posted: 30 May 2012

Date Written: May 30, 2012

Abstract

In the context of the present crisis of microfinance, it is quite common to use the term over-indebtedness among the poor. Coming up with a precise definition of over-indebtedness for research or regulatory purposes is surprisingly a complex challenge. Few of researchers took attempt to define and measure over-indebtedness among microfinance borrowers. Among them Maurer and Pytkowska (2010); Spannuth & Pytkowska (2011) and Schicks (2011) are notable. But their definition and measurement process of over-indebtedness are not unique. Maurer and Pytkowska showed that by taking microcredit, 17% borrowers are over-indebted and 11% borrowers are at risk of becoming over-indebted in Bosnia and Herzegovina. Spannuth & Pytkowska demonstrated that 7% borrowers are insolvent, 4% borrowers are in critical position and 14% are at risk of becoming over-indebted in Kosovo. Schicks displayed that 30% borrowers are over-indebted in Ghana. The endeavor of this paper is to show the real fact whether microcredit creates over-indebtedness among its borrowers or not.

Keywords: Microcredit, Borrowers, Over-indebtedness

JEL Classification: G21, H63

Suggested Citation

Alam, Sk. Mahmudul, Does Microcredit Create Over-Indebtedness? (May 30, 2012). Available at SSRN: https://ssrn.com/abstract=2070616 or http://dx.doi.org/10.2139/ssrn.2070616

Sk. Mahmudul Alam (Contact Author)

Institute of Microfinance (InM) ( email )

Dhaka
Bangladesh

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