Paper
A Study Analyzing the Effects of Food and Fuel Inflation on Microfinance Institutions and Borrowers
Has inflation increased loan delinquencies and risks?
Download40 pages
This microREPORT investigates the effects of food and fuel inflation on MFIs in Bangladesh, Haiti and Nicaragua. The study surveyed eight MFIs and 96 individuals including borrowers, loan officers and MFI senior management. It also drew on existing literature. Study findings indicate that:
- Costs have increased in all the countries at a far greater rate than borrowers' income;
- This has in turn increased loan delinquencies and risks;
- Most MFIs are unprepared for the total effect that inflation will have on the institution, both, from portfolio risk management and operational points of view;
- Some MFIs allocate a greater proportion of the portfolio to agriculture-related loans and a lesser portion to loans for consumption.
The report states that MFIs are facing a dramatic increase in delinquencies. MFI borrowers face higher costs while incomes have largely remained the same. Sustainability of MFIs will depend on preemptive adoption of risk management techniques.
About this Publication
Published
