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Over-indebtedness of microfinance clients


Since 2008, MFC has studied drivers and deterrents of client over-indebtedness through annual MFI mapping studies and targeted country studies

Our work reveals worrying trends around the scale of multiple borrowing and cross-borrowing from different financial institutions. The major lessons emerging include:

Key drivers of repayment problems:

  • Number of loans: clients with multiple loans are more likely delay payments
  • Loan size: larger loans are more often overdue
  • Repayment phase: loans closer to maturity tend to be repaid with lower discipline
  • High debt load: clients relay later when their monthly repayment is a higher percentage of their monthly disposable income

Key household-level factors preventing over-indebtedness:

  • Emergency savings: clients who can cover unexpected costs from savings are less likely to default
  • Remittances income: income received from migrant family members helps to prevent over-indebtedness

MFC recommendations

We developed a set of recommendations for key groups of industry stakeholders around responsible lending practices, transparency and financial education. These recommendations are based on our research in Bosnia-Herzegovina, Kosovo and Kyrgyzstan. Read this report in:

Learn more about our projects in:

 European Union: Measuring Over-indebtedness: Indicators, Data, Reporting

Project Dates: 1st January - 31 December 2014

Supported by: European Commission


Lebanon: Measuring Indebtedness Levels of Low-Income Borrowers

The goal of the study is to measure indebtedness levels of active microcredit clients at individual and household level in Lebanon. For this purpose, the study aims at identifying current tendencies in the Lebanese sector and at increasing the overall transparency within the sector. If significant cross- or over-indebtedness is found, its causes shall be analyzed to subsequently formulate recommendations for stakeholders (policy-makers, financial service providers, donors and investors) to proactively control or reactively respond to clients’ overindebtedness.

Project dates: November 2014 - on-going

Supported by: SANAD Fund for MSMEs


 Bosnia and Herzegovina: Indebtedness Revisited: the Level of indebtedness of MSME Credit Customers and the Quality of Finance

This report analyses the level of indebtedness of MSME credit customers and the quality of finance in Bosnia and Herzegovina (BiH). 

The objectives of the follow-up study in 2013 are to:

  • assess the current level of indebtedness and repayment performance of micro, small and medium enterprises (MSMEs) and retail borrowers in BiH,
  • examine the factors – on both the demand and supply side – that drive high levels of indebtedness,
  • assess the quality of finance for these clients of financial institutions, and
  • propose recommendations for financial institutions in BiH.

Read the final report (English)


Azerbaijan: Study on the risk of over-indebtedness of microcredit clients

This study on the risk of over-indebtedness in the ECA region was carried out in partnership with the Azerbaijan Micro Finance Association (AMFA). The objectives were to:

  • Understand the debt levels and underlying borrowing patterns of clients
  • Identify demand and supply factors that influence over-indebtedness
  • Recommendations solutions for over-indebtedness in the country.

Project dates: May 2011 – August 2012
Supported by: European Fund for Southeast Europe – Development Facility

Read the summary paper (English)


Kyrgyzstan: Research on indebtedness and repayment performance

In this study, MFC analyzed data from the CIB "Ishenim" credit bureau, which manages borrower information from around 50 financial institutions (banks and MFIs) in Kyrgyzstan. The objectives were to:

  • measure clients’ level of debt use
  • understand patterns of credit use 
  • identify credit use characteristics and demographic features of clients with repayment problems
  • explore financial institutions’ perspectives on the drivers of over-indebtedness.

Project dates: June – December 2012
Supported by: ICCO

Read the final report: Research on the Level of Indebtedness and Repayment Performance of Individual Borrowers in Kyrgystan (English)  (Russian)


Kosovo: Study on the risk of over-indebtedness

This study sought to understand whether there is a problem of (over-)indebtedness among microcredit clients in Kosovo. Through analyzing credit bureau data and conducting surveys with financial institutions and clients, we were able to:

  • understand the debt levels and underlying borrowing patterns of clients
  • identify demand- and supply-side factors influencing over-indebtedness
  • recommend solutions to over-indebtedness.

This initiative was endorsed and supported by the Central Bank of Kosovo (CBK) and the Credit Registry of Kosovo (CRK).

Project dates: September 2010 – October 2011
Supported by: European Fund for Southeast Europe - Development Facility

Read the final report in:


Bosnia and Herzegovina: Pilot study on access of low-income households to financial services

This study examined the application of customer protection principles, access to financial services and the risk of over-indebtedness among low-income clients in Bosnia Herzegovina.

The findings confirmed a high level of indebtedness and, in certain client segments, cross-borrowing and potential risk of over-indebtedness. The study found the interest in and use of financial services other than credit to be rather low among the survey participants, while pointing at a worryingly weak savings culture. Importantly, this project was an opportunity to test the relevance of the issue on a smaller scale, and pilot the methodology before a roll-out study.

Project dates: September – November 2008
Supported by: European Fund for Southeast Europe - Development Facility

More information: Project website


Bosnia and Herzegovina: Follow-up study on the risk of over-indebtedness of microcredit clients

This study focused on client over-indebtedness in Bosnia and Herzegovina, levels of which were the highest in the Central and Eastern Europe market. The study results confirm that a sizeable proportion of borrowers in Bosnia and Herzegovina experience difficult financial situations  and have problems repaying their debts.

Project dates: July – November 2009
Supported by: European Fund for Southeast Europe - Development Facility

Learn more here: