Over-Indebtedness in Nepalese Microfinance Institution – A Study of Clients of Nirdhan Utthan Bank

Soni Sahani, Sundip Bansal, Kalpana Sahani, Nitesh Khatiwada, Jeevan Kumar Bhattarai

Abstract


This paper analyses the over-indebtedness of micro-borrowers of Nirdhan Utthan Bank in Birgunj, Nepal. Descriptive analytical research design is attempted to explore the scenario of factor of over-indebtedness and impact of multiple borrowing. The research is primary data based on 150 sample respondents from Birgunj and convenient and structured questionnaire had been used to collect response of the respondents and data was collected through face to face interview with the clients. In this study majority of the clients are involved in multiple borrowing 82 %, it finds that loss of income and multiple borrowing is the major factor that leads to over-indebted. The paper also shows the association between factors of over-indebtedness and multiple borrowing and how frequently micro-borrower repeats them and for this cross tabulation analysis and chi-square test was used to analyze the data. The results show that over-indebtedness is significantly associated with multiple borrowing. The risk of over-indebtedness further increases with the occurrence of multiple borrowing. Results show that small size of loans issued by MFIs and needs of the clients was one of the major reasons for multiple loans contracts. Other reasons for multiple borrowing include family obligation, loan recycling, and relaxed or simple loan procedures, and influence from friends who are taking multiple loans, delayed loan disbursement from the MFIs in which the client first applied.

Full Text:

PDF

References


Banerjee, A., Karlan, D., & Zinman, J. (2015). Six Randomized Evaluation of Microcredit. American Economic Journal: Applied Economies, 7:1-21.

Canner, & Lucket. (1991). Is Commercialization of Microfinance Responsible for Overindebtedness? Journal of Economics and Sustainable Development, 4:33-42.

Chaudhury, I., & Matin, I. (2002). Dimensions and Dynamics of Microfinance Membership Overlap - A Micro Study from Bangladesh. Small Enterprise Development. 13:46-55.

Churchil, C., & Guerin, I. (2004). Microfinance Led Strategies to Eliminate Bonded Labor. Bangladesh: International Labour Organization (ILO).

Collins, D. (2008). Debt and Household Finance: Evidence from Financial Diaries. Development Southern Africa, 25: 469-479.

Collins, D. (2008). Debt and Household Finance: Evidence from Financial Diaries. Development Southern Africa, 25:469-479.

Gonzalez, A. (2008). Microfinance, Incentives to Repay, and Over-indebtedness: Evidence from Household Survey in Bolivia. Ohio: Ohio State University

Guerin, I., & Roesch, M. (2009). The Social Meaning of Over-indebtedness and Creditworthiness in the Context of Poor Rural South-Indian Household. Paris: The Centre's Publishing House.

Krishnaswamy, K. (2007). Competition and Multiple borrowing in the Indian Microfinance Sector. Working Paper, Institute for Financial Management and Research, Center for Microfinance, 313-318.

Mpogole, H., Mwaungulu, I., Mlasu, S., & Lubawa, G. (2012). Multiple Borrowing and Loan Repayment: A Study of Microfinance Clients At Iringa, Tanzania. Global Journal of Management And Business Research, 12:58-68.

Olomi, D. (2009). African Entrepreneurship and Small Business Development. Tanzania: Dares Salaam.

Rinaldi, L., & Sanchis-Arellano, A. (2006). Household Debt Sustanability. What Explains Household Non-Performing Loans? An Empirical Analysis. European Central Bank Working Paper Serious No. 570:263-291.

Schicks, J. (2013). A Customer Protection Perspective on Measuring Over-Indebtedness. Center For European Research in Microfinance, 92-102.

Schmidt, R. (2012). Microfinance, Commercialization and ethics. Poverty and Public Policy, 2: 99-137.

Shicks, J., & Rosenberg, R. (2011). Too Much Microcredit? A Survey of the Evidence on Over-indebtedness. CGAP, 77-91.

Wisniwski, V. (2010). Overindebtedness: Evidence, Causes and Consequences. European Fund for Southeast Europe, Prague, Czech Republic. International Journal of Poverty Alleviation, 1-18.




DOI: https://doi.org/10.23956/ijermt.v7i4.1

Refbacks

  • There are currently no refbacks.