It is my privilege to close out this blog series which has been a wonderfully rich exploration of one of the most complex and consequential topics in microfinance.  I’m tempted just to sit back and say – I like what Rich wrote about the challenge of definitions and how Jessica illustrated the difficulty of drawing [...]

Microfinance Institutions in Andhra Pradesh and elsewhere in India are keen to avoid over-indebtedness or place clients in distress. A joint effort by EDA Rural Systems and CGAP investigated the mass defaults of 2009 in Karnataka. The study draws from a representative survey of 900 customers in two mass defaults towns, Kolar and Ramanagaram and [...]

The consequences of over-indebtedness are shared among all stakeholders in microfinance. Households, individuals, and communities are affected by borrowers who cannot repay their debts. They risk the loss of livelihoods, reputations and the chance to improve their families’ lives. MFIs that lend to over-indebted borrowers face potentially large loan write offs. Microfinance Investment Vehicles (MIVs) [...]

While over-indebtedness can be difficult to observe in practice, we can use simple surveys to estimate one proxy for over-indebtedness: cross-indebtedness, or the number of institutions from which the typical borrower has a loan. In markets with strong credit bureaus, MFIs have good data to support such surveys. Data on multiple borrowing lets us test [...]

The study referred to in my post yesterday, defines over-indebtedness as the inability to repay all debts fully and on time. Over-indebtedness only occurs if this situation occurs chronically, i.e. several periods in a row and against the borrowers will. I agree with Rich Rosenberg and Jessica Schicks who argue that over-indebtedness can start before a [...]

Earlier this year Rich Rosenberg started this series with a blog which made the point that for most markets we simply don’t know how serious the issue of over-indebtedness is: we are flying blind in the face of a clear and present danger. What we need especially are early warning tools to identify problems. On [...]

In a well-argued recent posting in this series, Shameran Abed of BRAC warns us against attributing all of microcredit’s ills to commercialization. He reminds us that in Bangladesh there is evidence of an over-supply of microloans, with unhappy outcomes for some borrowers, even though private capital in pursuit of profit has played only a small part [...]

What has repeatedly astonished me about the discussion of over-indebtedness during the last couple of months is that people tend to treat the topic as if we only discovered it most recently. To say so may reveal me as a microfinance dinosaur. But didn’t we discuss over-indebtedness from every angle already back in 1998/99, when [...]

Like most microfinance practitioners, particularly in the sub-continent, I have thought a lot about the issue of over-indebtedness in the last few months. It’s not that it was any less of an issue before, but the Andhra Pradesh meltdown really made me question seriously whether we in Bangladesh have also been cavalier to the point [...]

The global debate on over-indebtedness tends to focus on the role of high rates of growth as its cause.  The argument is that growth is sustained by the less responsible MFIs who target easy to reach clients – the low hanging fruit – encouraging them to borrow and inadvertently getting them into trouble as a [...]

My comments below are made in the context of the steps which we took in South Africa over the last 10 years to implement a regulatory framework in which protection against over-indebtedness was one of our primary objectives.  South Africa’s Micro Finance Regulatory Council (MFRC) did extensive research on debt stress, based on samples from [...]

The issue of individual over-indebtedness has been around for a long time in microfinance, but the depth and extent of over-indebtedness that has recently emerged in Andhra Pradesh is quite unprecedented. Something is clearly rotten in the state of microfinance. It is vital that we recognise right away – however painful this will be for [...]

What a pleasure to see this discussion evolve – I believe that a broad discussion is what this over-indebtedness question needs. By involving everyone’s needs and concerns we will first of all learn that it is not “one” solution we are looking for. It is instead a set of responses to the various needs to [...]

Jessica Shicks’s post in this series argues that from a consumer protection perspective–I assume that’s the most relevant perspective for development practitioners–the notion of over-indebtedness should include not just situations where the borrower can’t repay, but also situations where the borrower can repay but only at the cost of “unacceptable” sacrifices. Adrian Gonzalez made much [...]

This blog series is just more evidence that the microfinance industry is currently united around a common concern: avoiding over-indebtedness. Whether to protect the social impact on customers or the institutional viability of MFIs, over-indebtedness is crucial to all parties involved. Still the most fundamental questions on over-indebtedness remain unanswered – in his recent post [...]

In a video-taped interview seven months ago, I expressed a degree of optimism that, historically at least, we had not been over-indebting unacceptable numbers of poor microborrowers, based on an admittedly tenuous inference from high repayment levels in most of the world. Since then, various conversations and data points have left me less comfortable with [...]

Some months ago I asked CGAP senior advisor Rich Rosenberg what he thought was the most pressing challenge for microfinance today, and his response–understanding over-indebtedness–was passionate. You can watch a video clip of Rich talking here . The issue of over-indebtedness, and whether microcredit does more harm than good to clients living in poverty is [...]