Microcredit client risk profiling

Abstract

Analysis of new and renewing microborrower risk behaviors at the Mexican microfinance institution FinComun shows that risk behavior can be predicted. The range of risk behaviors analyzed include: incidence of late payments, maximum number of weeks in arrears, and default. Males generally exhibited somewhat riskier patterns of credit behavior than females. Tools are provided for defining and predicting risky credit behavior. The implication is that these tools can be used to improve the management of credit risk and, therefore, improve the effectiveness of the microfinance program.