Abstract
Sustainability of microfinance institutions depends, among other factors, on having appropriate repayment levels. This article's contribution to the existing literature is the analysis of the role of a personality trait named "grit" in individual microcredit repayment decisions, alongside cognitive characteristics and time and risk preferences. This study is based on a survey of a sample of clients at 'Provident México', a formal microfinance institution that provides personal loans in vulnerable communities in Puebla, Mexico. We find evidence that, generally, older individuals possessing higher levels of grit and a tendency toward short term present bias are more likely to show no delays in loan repayments. Cognitive characteristics are inversely related to paying microcredits on time. Refinancing incentives does not play a key role in timely microcredit repayment, a result that is contrary to related literature but consistent with our finding that individuals in this sample that do not have delays in repayments are characterized by showing a short term present bias. El papel de las características cognitivas y de personalidad en el pago oportuno de microcréditos: Evidencia de una encuesta realizada por Provident, México.
Highlights
ResumenLa sostenibilidad de las instituciones microfinancieras depende, entre otros factores, de tener niveles apropiados de repago
The objective of this research is to examine the hypothesis that cognitive characteristics as well as personality traits and preferences play a role in microcredit repayment behavior
The survey included a total of 16 questions and was designed to gather information on the following variables: grit, cognitive characteristics, time and risk preferences, basic financial knowledge, and sociodemographic characteristics.[1]
Summary
ResumenLa sostenibilidad de las instituciones microfinancieras depende, entre otros factores, de tener niveles apropiados de repago. Este trabajo contribuye a la literatura existente al analizar el papel de un rasgo de personalidad denominado "diligencia” (“grit” en inglés) en las decisiones de repago de microcréditos individuales, junto con las habilidades cognitivas y las preferencias de tiempo y riesgo. Los resultados obtenidos indican que, en general, las personas mayores que poseen niveles más altos de diligencia, y que tienden a tener un sesgo por el corto plazo, tienen más probabilidades de no mostrar retrasos en el repago de los préstamos. Los incentivos de refinanciamiento no desempeñan un papel clave en el repago a tiempo del microcrédito, resultado contrario a la literatura sobre este tema pero que es acorde con el resultado del sesgo por el corto plazo que muestran los individuos de esta muestra que no tienen retrasos en sus pagos
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