Do Microloan Officers Want to Lend to the Less Advantaged? Evidence from a Choice Experiment

Sagamba, Moïse; Shchetinin, Oleg; Yusupov, Nurmukhammad

doi:10.2139/ssrn.1771665

Cited by 6 publications

(9 citation statements)

References 24 publications

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“…Their findings show that officers prefer financial aspects to social aspects. Sagamba et al (2013) studied the factors that matter for microloan officers, finding very little difference between the preferences of microloan officers of nonprofit and for-profit MFIs, which contrasts to the essence of the definition of microcredit.…”

Section: Pilot Casementioning

confidence: 99%

“…Several authors have reviewed the implementation of credit scoring in microfinance and conclude that MFIs using credit scoring do not take into account either social or environmental issues (Van Gool et al, 2012;Yu et al, 2015). The main determinants for loan allocation are related to the quality of the business projects, especially the expected probability of timely loan repayment (Sagamba et al, 2013;Hernandez and Torero, 2014). This is caused by the difficulty of integrating social and environmental aspects in credit scores, which are difficult to assess through a standardized procedure (Cornée and Szafarz, 2014).…”

Section: Introductionmentioning

confidence: 99%

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A social and environmental approach to microfinance credit scoring

Serrano‐Cinca

Nieto

Reyes

2016

Journal of Cleaner Production

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Microfinance institutions provide loans to low-income individuals. Their credit scoring systems, if they exist, are strictly financial. Although many institutions consider the social and environmental impact of their loans, they do not incorporate formal systems to estimate these social and environmental impacts. This paper proposes that their creditworthiness evaluations should be coherent with their social mission and, accordingly, should estimate the social and environmental impact of microcredit. Thus, a decision support system to facilitate microcredit granting is proposed using a multicriteria evaluation. The assessment of social impact is performed by calculating the Social Net Present Value. The system captures credit officers' experience and addresses incomplete and intangible information. The model has been tested in a microfinance institution. The paper shows how a small institution can include social and environmental issues in its decision-making systems to evaluate credit applications. A gap in the preferences was found between members of the board, who are socially driven, and managers and credit officers, who are financially drifted. This mission drift was corrected. The approach followed contributed to creating a culture of social and environmental assessment within the institution, especially among credit officers, thereby translating Microfinance institutions' social mission into numbers.

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Section: Pilot Casementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

A social and environmental approach to microfinance credit scoring

Serrano‐Cinca

Nieto

Reyes

2016

Journal of Cleaner Production

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“…Generally, the main microcredit attributes that have been used to explain the preferences of poor households are interest rate, repayment schedule, loan size and collateral method (Boucher et al, 2008;Tsukada et al, 2010;Sagamba et al, 2013;Kong et al, 2015). Interest rate, which is the price of financial service, has received the most attention ( Janvry et al, 2010;Rashid et al, 2011;Khandker and Koolwal, 2016;Tan and Lin, 2016).…”

Section: Introductionmentioning

confidence: 99%

Smallholder preferences and willingness-to-pay measures for microcredit

Ding

Abdulai

2018

CAER

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Purpose -The purpose of this paper is to examine smallholders' preferences and willingness to pay for microcredit products with varying attribute combinations, in order to contribute to the debate on the optimal design of rural microcredit. Design/methodology/approach -Data used in this study are based on a discrete choice experiment from 552 randomly selected respondents. Mixed logit and latent class models are estimated to examine the choice probability and sources of preference heterogeneity. Endogenous attribute attendance models are applied to account for attribute non-attendance (ANA) phenomenon, focusing on separate non-attendance probability as well as joint non-attendance probability.Findings -The results demonstrate that preference heterogeneity and ANA exist in the smallholder farmers' microcredit choices. Averagely, smallholder farmers prefer longer credit period, smaller credit size, lower transaction costs and lower interest rate. Guarantor collateral method and installment repayment positively affect their preferences as well. Moreover, respondents are found to be willing to pay more for the attributes they consider important. The microcredit providers are able to attract new customers under the current interest rates, if the combination of attributes is appropriately adjusted. Originality/value -This study contributes to the debate by assessing the preference trade-off of different microcredit attributes more comprehensively than in previous analyses, by taking preference heterogeneity and ANA into account.

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“…The microfinance attributes considered here are six vital loaning components as follows: credit period, interest rate, loan size, collateral method, repayment schedule and transaction costs. These factors are the main determinants of rural microloan disbursements that are designed in each credit product (Tsukada et al, 2010;Turvey et al, 2010;Sagamba et al, 2013).…”

Section: Datamentioning

confidence: 99%

What can we learn from experience? An impact analysis of experience on households' preferences for microfinance

Ding

Abdulai

Jiang

2020

CAER

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PurposeThis article examines the impact of experience on rural households' preferences for microfinance attributes, using household data from Sichuan province in China.Design/methodology/approachWe use the Bayesian updating method to account for the learning process involved in acquiring experience on microfinance. We then use the generalized multinomial logit model that accounts for both preference and scale heterogeneity to estimate the choice probabilities and impact of experience on preferences and willingness-to-pay (WTP) for microfinance.FindingsThe empirical findings show that experience with microfinance products or lending institutions helps households in their selections of microfinance institutions. In particular, experience with financial institutions increase the scale parameter and help respondents to feel assured about their choices, while experience with individual lenders have no such effects. The results also indicate that the willingness-to-pay estimates vary across experiences, with WTP for installment credit displaying the biggest change and the Bayesian updating making the changes even much larger.Originality/valueThis study contributes to the research gap by taking experience as a latent variable that influences personal specific tastes and as an integral part of total utility of rural households in their decision-making processes. We develop a conceptual framework that is based on McFadden's random utility theory and Bayesian inference.

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Do Microloan Officers Want to Lend to the Less Advantaged? Evidence from a Choice Experiment

Cited by 6 publications

References 24 publications

A social and environmental approach to microfinance credit scoring

A social and environmental approach to microfinance credit scoring

Smallholder preferences and willingness-to-pay measures for microcredit

What can we learn from experience? An impact analysis of experience on households' preferences for microfinance

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