Measuring Delinquency and Default In Microfinance Institutions

13 Pages Posted: 16 Sep 2012

See all articles by R. Srinivasan

R. Srinivasan

Indian Institute of Management (IIMB), Bangalore - Finance & Control

Date Written: April 30, 2007

Abstract

The focus of this article is on measuring loan delinquency and default in microfinance institutions (MFls) at top management level. The core issue addressed is how well does an MFI's management control system accurately assess delinquency and default. By this I mean how do senior managers judge the quality of the loan portfolio from financial data. I do not intend to cover how a field-level staff responsible for, say, 150 borrowers monitors her loan portfolio. The article is clearly not intended for MFls with high quality loan portfolios, but for the run-of-the mill MFls (such as the typical Indian MFI with a Portfolio-at-Risk [PAR 60] of 14.1% (M-CRIL 2005). In this article, a loan is delinquent if installments are delayed and in default if one or more installments are never repaid.

Suggested Citation

Srinivasan, Raghavan, Measuring Delinquency and Default In Microfinance Institutions (April 30, 2007). IIM Bangalore Research Paper No. 254, Available at SSRN: https://ssrn.com/abstract=2146468 or http://dx.doi.org/10.2139/ssrn.2146468

Raghavan Srinivasan (Contact Author)

Indian Institute of Management (IIMB), Bangalore - Finance & Control ( email )

Bannerghatta Road
Bangalore, 560 076
India

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