What Happens to Microfinance Clients Who Default?

This study explores how microfinance institutions (MFIs) treat microfinance clients who are unable to repay their loans. It was motivated by a dearth of information on the client-facing actions MFIs take when a borrower moves into default. The study looks closely at MFI practices in three focus countries with diverse legal systems, market conduct regulators, credit bureaus, and local actors. The research team investigated three very different markets in order to challenge the notion that MFI responses to default are universal or standard.

This analysis attempts to understand the practices, and whether and how they are influenced by the market context, regulation, or incentives which influence MFIs.