Repayment Frequency and Default in Microfinance: Evidence from India

Erica Field, Rohini Pande

2008

In stark contrast to bank debt contracts, most microfinance contracts require that repayments start nearly immediately after loan disbursement and occur weekly thereafter. Even though economic theory suggests that a more flexible repayment schedule would benefit clients and potentially improve their repayment capacity, microfinance practitioners argue that the fiscal discipline imposed by frequent repayment is critical to preventing loan default. In this paper authors use data from a field experiment which randomized client assignment to a weekly or monthly repayment schedule and find no significant effect of type of repayment schedule on client delinquency or default.

Type

Journal Article

Thematic Area

Financial Inclusion