<p>The first of the two essays in
this dissertation uses primary data from Bangladesh to explore the role of microloan repayment frequency (weekly
vs. bi-weekly, assigned randomly) on loan repayment performance of microfinance
borrowers after controlling for their inherently distinct time preferences. The
findings show that the borrowers’ individual time preference
is an important determinant of their repayment behavior. Specifically, the
repayment performance of present-biased borrowers improves significantly when
they happen to be assigned to the weekly repayment schedule instead of the bi-weekly schedule. Also, irrespective of
time preference, borrowers are found to invest more in new businesses under a
more flexible (i.e., bi-weekly)
repayment schedule. Overall, our findings suggest that instead of a "one
size fits all" approach, by offering loans with a weekly (bi-weekly) repayment schedule matched to
the present-biased (time-consistent) borrowers, the MFIs might be able to
minimize their transaction costs while ensuring high repayment rates. This
would also benefit the borrowers by enabling them to venture into new business
investments. </p>
Using primary
data from Bangladesh, the second essay seeks to examine two aspects of
religiosity that might affect the microfinance borrowers’ repayment performance.
First, whether individual religiosity influences repayment behavior. Second,
whether the impact of religiosity changes with borrowers’ age, and level of
community religiosity. The results show religiosity to be a significant
determinant of a borrower’s repayment behavior, as individuals with higher
religiosity are found to be better borrowers. Also, the positive impact of
religiosity is stronger for older borrowers, and for borrowers who live in
comparatively less religious community. These findings indicate that MFIs can
take into consideration the degree of individual and community religiosity to
decide on the intensity of supervision required for borrowers. Borrowers with
higher level of religiosity can possibly go on with minimal level of
supervision as they are less likely to default. This reduced supervision would
reduce travel costs incurred by MFI staff, making operations more
cost-effective. This will also help free up loan officers’ and borrowers’ time.
Thus, MFIs and borrowers can take advantage of this and invest time to other
productive activities. The MFIs can also make better use of the freed-up staff
to increase coverage.
| Identifer | oai:union.ndltd.org:purdue.edu/oai:figshare.com:article/10008215 |
| Date | 30 October 2019 |
| Creators | S.M. Zahid Iqbal (7518311) |
| Source Sets | Purdue University |
| Detected Language | English |
| Type | Text, Thesis |
| Rights | CC BY 4.0 |
| Relation | https://figshare.com/articles/Essays_on_repayment_and_microfinance/10008215 |
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