Abstract
Agent-Based Mapping of Credit Risk for Sustainable Microfinance
Highlights
Contradictory evidence of the impact of microfinance [1,2,3,4] has simultaneously been the root of high praise and harsh criticism
To sustainably provide loans to borrowers not served by the traditional financial system, microfinance institutions (MFIs) are critically dependent on a high loan payment probability, itself largely driven by the economic environment in which a given MFI operates
Reducing the major credit risks of MFIs to just a few parameters, as we have done offers practical pathways to risk mapping and management, similar in spirit to the approach used by Ref. [15]
Summary
Contradictory evidence of the impact of microfinance [1,2,3,4] has simultaneously been the root of high praise and harsh criticism. Opponents accuse microfinance institutions (MFIs) of creating even more poverty [6], while some have gone so far as to claim that MFIs may harbor private groups with vested interest in perpetuating the current situation in many poor regions of the world [7] Both sides, despite ideological differences, have devoted a great deal of debate to the sustainability of microfinance, the reduction of information asymmetries [1, 8,9,10] and the non-profit versus forprofit dilemma [1, 4, 8,9,10,11]. Achieving the desired balance rests on the successful control of credit
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