preprint · Research Square
Abstract The objective of this paper is to show how the components of a debt contract optimize the loan repayment terms of borrowers (BEPs) at MFIs. The results of the bivariate probit model censored from a database of 321 group loan contracts granted over a period from 2007 to 2014 in the different second-tier MFIs show a pre-default of borrowers characterized by late repayment behavior and/or penalty payments. Our model successfully predicts being a pre-default borrower by 70.75%, while being a non-pre-default borrower will be successfully predicted by 69.54%. The results also show that the model correctly classifies 70.09% of the sample observations. Our results show that the sector of activity, the nature of the project and the presence of other MFIs in the area have a significant effect on reducing the risk of pre-default. Similarly, we note that the interest rates applied to group loans and loan rationing significantly increase the potential for group default. Jel classification : D84; D86; G41; G51
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DOI: 10.21203/rs.3.rs-2859394/v1
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