Credit risk assessment in the microfinance industry

Ayayi, Ayi Gavriel

doi:10.1111/j.1468-0351.2011.00429.x

Cited by 31 publications

(16 citation statements)

References 8 publications

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“…Yet, the same factors negatively influence MFIs as well. In the Vietnamese microfinance industry, Ayayi [5] positively correlate age in business, management and strategy, systems and reporting, internal and operational controls, and active government constructive regulation with good financial stand of MFIs. He also noticed that write-offs are a good determinant of MFI's credit risk.…”

Section: Banks' Determinants Of Bankruptcymentioning

confidence: 99%

Anticipating the Difficulties of Microfinance Institutions: An Early Warning Model Applied to the Togolese Context

Pakidame¹,

Ogbone²,

Kounetsron³

2020

IJBER

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The Decentralized financial system (DFS) is a sector in growth in developing countries. It offers financial services to actors rejected by formal banks because of their risk. therefore, a strict monitoring of this sector is needed to anticipate and avoid the bankruptcies of DFSs. In this context, an early warning model is a feasible solution. The aim of this paper is to develop a model of alert capable of predicting the difficulties of microfinance institutions. Data processed from 49 DFSs over 5 years led to a model explaining up to 80% of the likelihood of bankruptcy. Statistically positive results show that any increase in the portfolio at risk, the provisions on outstanding loans and the provisions on total assets leads to an increase in the probability of difficulty for the DFSs, thus increasing its insolvency risk while any increase in the equity risk coverage ratio, the operating income on owner's equity, the loan coverage by deposits ratio, the profit margin and the outstanding deposits on total assets leads to a decrease in the probability of default for the DFSs.

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Section: Banks' Determinants Of Bankruptcymentioning

confidence: 99%

Anticipating the Difficulties of Microfinance Institutions: An Early Warning Model Applied to the Togolese Context

Pakidame¹,

Ogbone²,

Kounetsron³

2020

IJBER

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“…The main sources of credit risk that have been identified in the literature include, limited institutional capacity, inappropriate credit policies, volatile interest rates, poor management, inappropriate laws, low capital and liquidity levels, massive licensing of banks, poor loan underwriting, reckless lending, poor credit assessment, laxity in credit assessment, poor lending practices, government interference, inadequate supervision by the central bank, and information asymmetry (Stiglitz and Weiss, 1981;Chen et al, 2006;Ayayi, 2012).…”

Section: Credit Riskmentioning

confidence: 99%

Credit Risk Management Framework for Rural Commercial Banks in China

Wang¹,

Wang²,

Wang³

2017

JFRM

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Credit risk management (CRM) is to identify, measure, monitor, and control risk arising from the possibility of default in payments. Existing CRM tools available for large financial institutions do not meet the requirements of rural commercial banks (RCBs) because their main customers are SMEs and farming households whose financial data and credit rating records are not available. RCBs in China also expose specific risks connected to rural commercial banking business and in particular farming-related loans and services. Adopting a qualitative analysis approach to identify key factors contributing to failures of RCBs' customers, we endeavour to develop a CRM framework for RCBs in China. The framework, which is based on the identification of business failures of RCBs' customers and factors contributing to failures of SMEs and farming households, incorporates financial and non-financial variables. Using nonfinancial variables along with financial variables as predictors of company failure significantly improves credit analysis quality and accuracy. Also, this study recognises guanxi 1 as risk potentials and includes guanxi risks in the framework. This study has made contributions to the extant literature on CRM of banks in general and RCBs in particular.

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“…Ayayi (2012) argued that low credit risk is a direct consequence of good im-plementation of corporate governance practices, while Beisland and Mersland (2012) argued that ratings of MFIs are mostly driven by these institutions' size, profitability and risk exposure.…”

Section: External Corporate Governance -The Microfinance Industrymentioning

confidence: 99%

Microfinance institutions' failure to address poverty: A narrative critical literature review

Gudjonsson¹

2017

TVE

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This critical literature review begins by giving a short introduction to the microfinance industry. Microfinance institutions (MFIs) are explained and an account is given of their dual performance goals of financial performance ('financial sustainability') and social performance ('outreach'). While MFIs' social performance is directly aimed at poverty reduction, it is noteworthy that often they fail to address poverty (i.e., they fail to deliver outreach). The aim of the paper is to answer the following research question: Why have microfinance institutions (MFIs) failed to address poverty? In order to establish the reason, the first step is to look at how the MFIs are managed and controlled, i.e. to examine MFIs' corporate governance literature. This critical literature review was conducted using systematic on-line searches in the databases Scopus and Web of Knowledge; the main key words used were microfinance, gender, corporate governance and performance. The unconvincing nature of the findings of a review of the corporate governance literature suggests that another factor should be taken into consideration: that of gender; after all, MFIs are mainly used by women. The findings from reviewing the microfinance literature suggests that microfinance gender literature may explain why MFIs have not adequately addressed poverty, but this literature consists of a few studies only and further studies are needed. The literature on gender in general is more substantial, however. Some

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Credit risk assessment in the microfinance industry

Cited by 31 publications

References 8 publications

Anticipating the Difficulties of Microfinance Institutions: An Early Warning Model Applied to the Togolese Context

Anticipating the Difficulties of Microfinance Institutions: An Early Warning Model Applied to the Togolese Context

Credit Risk Management Framework for Rural Commercial Banks in China

Microfinance institutions' failure to address poverty: A narrative critical literature review

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