Agent-based mapping of credit risk for sustainable microfinance.

Agent-based mapping of credit risk for sustainable microfinance.

Blog Article

By drawing analogies with independent research areas, we propose an unorthodox framework for mapping microfinance credit risk--a major obstacle to the sustainability of lenders outreaching to the poor.Specifically, using the elements of network theory, we Cali disc constructed an agent-based model that obeys the stylized rules of microfinance industry.We found that in a deteriorating economic environment confounded with adverse selection, a form of latent moral hazard may cause a regime shift from a high to a low loan payment probability.An after-the-fact recovery, when possible, required the economic environment to improve beyond that which led to the Stroller Book shift in the first place.

These findings suggest a small set of measurable quantities for mapping microfinance credit risk and, consequently, for balancing the requirements to reasonably price loans and to operate on a fully self-financed basis.We illustrate how the proposed mapping works using a 10-year monthly data set from one of the best-known microfinance representatives, Grameen Bank in Bangladesh.Finally, we discuss an entirely new perspective for managing microfinance credit risk based on enticing spontaneous cooperation by building social capital.