Paper
The Intermediary Role of Microloan Officers: Evidence from Ethiopia
Determining the effect of microloan officers on MFI operations
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39 pages
This paper studies the impact of loan officers (LOs) on the loan portfolio of MFIs in Ethiopia through a survey and choice experiment of 800 LOs estimating their preferences over loan allocation. The study examined how these preferences are affected by the organizational structure of the MFI, for example, incentive provision. With a focus on the monitoring of borrowers and loan officer discretion, the paper makes the following observations:
- LOs pay attention to both borrower characteristics related to pro-social aims and to the characteristics of the project that relate to the financial sustainability of the MFI;
- Generally, incentives provided by the MFI influence LOs allocation decisions. Those incentives that target specific characteristics of an applicant, such as gender or poverty level, seem to influence allocation decisions in the intended direction;
- When LOs are incentivized to provide loans to the poorest or to women, they pay less attention to the level of savings of an applicant;
- Perceived aim of the MFI affects LOs allocation decisions;
- LOs discretion in reporting and sanctioning is important for the effect of monitoring difficulty in allocation decisions.
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