Credit risk assessment in the microfinance industry |
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Authors: | Ayi Gavriel Ayayi |
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Institution: | Associate Professor of Financial Economics, Université du Québec à Trois Rivières, Québec, Canada. E‐mail: ayi.ayayi@uqtr.ca |
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Abstract: | This paper discusses credit risk assessment through conventional and specialized credit evaluation metrics. I find that low credit risk is a direct consequence of sound implementation of good governance practices and sustainable financial performance through sound qualitative and quantitative risk management tools. Furthermore, I find that the depth and breadth of outreach and write‐off are by some margin the two most important determinant indicators of a microfinance institutions’ (MFI’s) credit risk control. In addition, I demonstrate that there is no significant statistical difference in terms of risk management among the different types of MFIs. Results also suggest that constructive regulation to promote MFIs has a non‐negligible impact on the risk assessment of MFIs. |
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Keywords: | G21 G32 G38 Assessing credit risks microfinance industry microfinance institutions regulation East Asia and Pacific Vietnam |
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