Title of Research Project
Why Risk It? The Effect of Risk and Time Preferences on Microfinance Loan Default
Major
International and Development Economics
Research Abstract
Microfinance is widely recognized as a powerful method for poverty alleviation. However, little is known about the characteristics of those who default on their loans. Understanding the behavior of borrowers is important to mitigate default for microfinance lenders. This study investigates whether non-delinquent and delinquent borrowers reveal any difference in their level of risk and time preference through an artefactual field experiment. The results reveal that non-delinquent borrowers are more likely to be risk-seeking individuals and are more impatient than delinquent borrowers, contradicting current literature on risk-aversion and time preference.
Faculty Mentor/Advisor
Dr. Wydick
Included in
Why Risk It? The Effect of Risk and Time Preferences on Microfinance Loan Default
Microfinance is widely recognized as a powerful method for poverty alleviation. However, little is known about the characteristics of those who default on their loans. Understanding the behavior of borrowers is important to mitigate default for microfinance lenders. This study investigates whether non-delinquent and delinquent borrowers reveal any difference in their level of risk and time preference through an artefactual field experiment. The results reveal that non-delinquent borrowers are more likely to be risk-seeking individuals and are more impatient than delinquent borrowers, contradicting current literature on risk-aversion and time preference.
