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Forewarned is forearmed – repayment delays in microfinance relationships

Imke Hering (Department of Agricultural Economics and Rural Development, University of Göttingen, Göttingen, Germany)
Oliver Musshoff (Department of Agricultural Economics and Rural Development, University of Göttingen, Göttingen, Germany)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 3 July 2017




In order to improve the assessment of current lending policies for a microfinance institution (MFI) in Azerbaijan, the purpose of this paper is to analyse how lending conditions are adjusted based on knowledge gains during the loan relationship, with particular attention to delays in previous loans. Moreover, the paper examines what a lender can pre-determine from its own collected repayment records of clients. In addition, the repayment performances and lending policies between agricultural and non-agricultural clients are differentiated.


The analyses are based on a rich data set of an Azerbaijani MFI. For determining the influence of previous delays on the volume rationing in the following loan, the authors apply a generalized linear model. Subsequently, the probability of recidivism is analysed by means of a logit model.


The results confirm a positive relationship between delays in previous loans and repayment problems in present loans, which is increased by the severity of the previous delay. With respect to consequences, it is shown that the borrower with previous delays faces an increase in loan volume rationing in the subsequent loan. Moreover, the authors find that the consequences of previous delays do not differ significantly between farmers and other clients.


Until now, the consequences of repayment delinquencies in microfinance lending relationships have hardly been investigated. This study enhances the understanding of lending policies in microfinance by focussing on relationship aspects and by simultaneously differentiating between farming and non-farming clients.



The authors would like to thank two anonymous referees and the editor for helpful comments and suggestions. Moreover, the authors gratefully acknowledge financial support from the German Research Foundation (DFG) and thank the Access Microfinance Holding AG for the provision of data.


Hering, I. and Musshoff, O. (2017), "Forewarned is forearmed – repayment delays in microfinance relationships", Agricultural Finance Review, Vol. 77 No. 2, pp. 218-238.



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