Faruqee, RashidKhandker, Shahidur R.Samad, Hussain A.2013-10-022013-10-022013-08https://hdl.handle.net/10986/16007Microcredit programs in Bangladesh have experienced spectacular growth in recent years, with a growing number of borrowers availing credit from multiple microcredit agencies. There is a growing concern that if there are not sufficient returns to borrowing from microfinance institutions (MFIS), some borrowers might be taking loans that they will not be able to repay. A household may be considered over-indebted, for example, if its debt liability exceeds 40 percent of its income or assets. Using a long panel of household survey data from Bangladesh, the paper finds that some 26 percent of microcredit borrowers are over-indebted on this measure versus 22 percent of non-microcredit borrowers. Econometric analysis suggests that both MFI competition and multiple borrowing raise indebtedness. However, repeated borrowing, while it affects short-term liability adversely, does affect the long-term debt-asset ratio favorably. That is, repeated borrowing helps increase assets more than debt over time. Microcredit borrowers in Bangladesh are thus not necessarily over-indebted. But when borrowing is seen as protection against shocks such as floods even at the cost of being indebted, MFIs may offer micro-insurance schemes to safeguard borrowers against economic shocks.en-USCC BY 3.0 IGOACCESS TO CREDITADVERSE EFFECTADVERSE SHOCKSAGRICULTURAL BANKSAGRICULTURAL DEVELOPMENT BANKSARREARSASSET RATIOASSET VALUESBANK OF ENGLANDBANK POLICYBANKRUPTBIDSBORROWERBUFFERCOMMERCIAL BANKCOMMERCIAL BANKSCONSUMER CREDITCONSUMER GOODSCONSUMER PROTECTIONCONSUMPTION SMOOTHINGCONTROL VARIABLESCREDIBILITYCREDIT BUREAUSCREDIT CONSTRAINTCREDIT CONSTRAINTSCREDIT LIMITCREDIT LIMITSCREDIT MARKETSCREDIT PROGRAMSCREDIT RISKSCREDITWORTHINESSDEBTDEBT CONTRACTSDEBT LIABILITYDEBT PAYMENTDEBT PROBLEMSDEBT RATIOSDEBT SERVICEDEBT SERVICINGDEBT SERVICING COSTSDEBTSDEFAULT CASESDEFAULTSDEMAND FOR CREDITDEMAND-SIDE FACTORSDEPENDENCY RATIODEPENDENTDEPENDENT VARIABLEDEPENDENTSDEPOSITSDEPRESSIONSDESCRIPTIVE STATISTICSDEVELOPING COUNTRIESDISBURSEMENTDISBURSEMENTSECONOMIC CRISISECONOMIC SHOCKSENTREPRENEURSHIPENVIRONMENTAL FACTORSEXPENDITURESEXPLANATORY VARIABLESEXPOSUREEXTERNAL FACTORSFEDERAL RESERVEFINANCIAL DISTRESSFINANCIAL INSTITUTIONSFINANCIAL SERVICESFIXED EFFECTSFOREIGN CURRENCYFOREIGN CURRENCY MARKETSGOVERNMENT POLICIESHOLDINGHOUSEHOLD DEBTHOUSEHOLD DEBTSHOUSEHOLD INCOMEINCIDENCE OF INDEBTEDNESSINCOME GENERATIONINCOME-GENERATING ACTIVITIESINCOMESINDEBTEDINDEBTED HOUSEHOLDSINDEBTEDNESSINDIVIDUAL ACCOUNTSINFORMAL LOANSINSOLVENCYINSOLVENTINSTITUTIONAL ENVIRONMENTINSTRUMENTINTEREST RATEINTEREST RATESINTERNATIONAL BANKINVESTMENT OPPORTUNITYIRRESPONSIBLE BORROWINGJUDGMENTJUDICIAL EFFICIENCYLAND ASSETLAND ASSETSLEGAL ENVIRONMENTLENDERLENDERSLEVEL OF INDEBTEDNESSLEVEL OF REPAYMENTLIABILITYLIQUIDITYLIQUIDITY PROBLEMSLOANLOAN AGREEMENTSLOAN AMOUNTLOAN APPROVALSLOAN CONTRACTSLOAN MATURITYLOAN PAYMENTLOAN PORTFOLIOLOAN PORTFOLIOSLONG-TERM BORROWINGLONG-TERM DEBTMARKET INFORMATIONMATURITIESMICRO CREDITMICRO-CREDITMICRO-INSURANCEMICROCREDITMICROFINANCEMICROFINANCE INSTITUTIONMICROFINANCE INSTITUTIONSNATURAL DISASTERSNET ASSETSNET SAVINGSOUTSTANDING LOANSPAYMENT OBLIGATIONSPAYMENT SERVICESPORTFOLIO GROWTHPOVERTY ALLEVIATIONPOVERTY REDUCTIONPRIVATE INVESTMENTPRODUCTIVE INVESTMENTSRATES OF INTERESTREGULATORY REFORMREORGANIZATIONREPAYMENTREPAYMENT BEHAVIORREPAYMENT CAPACITYREPAYMENT RATESREPAYMENTSRETURNRETURNSRISK MANAGEMENTRISK MANAGEMENT STRATEGIESSEIZURESEIZURE OF ASSETSSHOCKS TO INCOMESHORT-TERM LIABILITYSTANDARD DEVIATIONSSTOCKSSUPPLY OF CREDITSUPPLY SIDESUPPLY SIDESSUPPLY-SIDESUSTAINABLE DEVELOPMENTUNSECURED DEBTVALUE OF ASSETSWAGE RATESpovertyWorld Bank10.1596/1813-9450-6574