The Intermediary Role of Microloan Officers: Evidence from Ethiopia
Working Papers in Economics 581, December 2013, University of Gothenburg
29 Pages Posted: 28 Dec 2013
Date Written: December 12, 2013
Microfinance institutions are key financial intermediaries between donors and borrowers in developing countries. Loan officers are crucial for establishing and maintaining the relationship between borrowers and microfinance institutions. This paper studies the impact of loan officers on the loan portfolio. We use a survey and choice experiment of 800 loan officers to estimate loan officers' preferences over loan allocation. We investigate how these preferences are affected by the organizational structure of the microfinance institution, for example, incentive provision. We pay special attention to monitoring of borrowers and loan officer discretion. The most important determinants of loan allocation are related to the financial viability of microfinance institutions rather than the pro-social mission of microfinance. We derive recommendations for the governance of microfinance institutions.
Keywords: Financial intermediation, Microfinance Loan officers, Loan allocation, Choice experiment
JEL Classification: G21, L31, O16
Suggested Citation: Suggested Citation