Study on over-indebtedness in the microfinance sector

17-01-2011 |
Microfinance has grown rapidly in recent years and provides access to financial services to millions of people worldwide at the base of the pyramid. It is an effective tool that opens new opportunities for many who otherwise would not be able to take advantage of these services and products.

Some microfinance markets, however, are showing signs of over-indebtedness and overheating. In light of the potentially negative repercussions of over-indebtedness, every effort should be made to prevent these markets from overheating.

As socially-oriented investors, Triodos Investment Management, responsAbility Social Investments AG and the Council of Microfinance Equity Funds attribute the utmost importance to reducing the risk of over-indebtedness. The study these three market players commissioned to the University of Zurich in Switzerland offers a first important step towards an early warning index of over-indebtedness in the microfinance sector. The aim of the initative is to help the microfinance sector avoid future crises.

The Executive Summary and the full version of the study Over-Indebtedness and Microfinance – Constructing an Early Warning Index are available under downloads.