Over-indebtedness and Microfinance: Constructing an Early Warning Index

Over-indebtedness and Microfinance: Constructing an Early Warning Index
By Vivien Kappel, Annette Krauss, Laura Lontzek – Published: 2010

This study examines the conditions that can lead to over-indebtedness and crisis in microfinance in order to create an early warning system for such events.  This system constructs a composite index for predicting over-indebtedness crisis in the microfinance industry, using macro-level, microfinance market, firm-level, and household-level indicators.  This index was constructed for 13 countries, some that had already experienced over-indebtedness or repayment crises.  With this sample of countries, the report creates a classification of countries according to current risk.  The paper suggests and provides recommendation for further validation of the index before it is applied to other countries.

 

Stay informed. Subscribe to our newsletter.

<noscript><iframe src="https://www.googletagmanager.com/ns.html?id=GTM-W5XP2HF" height="0" width="0" style="display:none;visibility:hidden"></iframe></noscript>