Trade-off between over-indebtedness and access to finance
In a recently issued paper, CGAP examines the empirical evidence on over-indebtedness among microcredit clients. Most of the studies that tried to quantify the issue found levels of microcredit over-indebtedness, but the countries involved were not representative of the worldwide microfinance industry. Based on the existing evidence it is not possible to conclude that over-indebtedness is a widespread problem.
CGAP points out that there is often a trade-off between over-indebtedness on the one hand and access to finance on the other: the only way to eliminate over-indebtedness completely is to stop lending. According to CGAP, the objective should be to reduce the prevalence of over-indebtedness to reasonable levels instead of aiming at total elimination of over-indebtedness.
Read the CGAP paper
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