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Credit Risk Analysis in Microcredit: How Does Gender Matter? Image

Promoting Inclusive Markets and Financial Systems

Credit Risk Analysis in Microcredit: How Does Gender Matter?

Credit Risk Analysis in Microcredit: How Does Gender Matter?

Summary

This paper  analyzes MFI credit risk, based on the loan portfolio of a leading Maghrebian MFI, in terms of number of clients served and portfolio size. The study works with a proprietary data set of 1,144,770 contracts issued between 1997 and 2007. It uses a resampling technique to estimate the probability density function of losses and value-at-risk measures for a portfolio of loans granted to female and male microfinance clients separately. Results show that:

Loss rates are higher for male client population than for female client population;
Difference is due to lower default probabilities for female clients, while recovery rates for male and female clients are similar;
Proportion of diversifiable risk in total risk is bigger for portfolios of loans granted to female clients than to male clients.



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