Are Microfinance Borrowers in Lebanon Over-Indebted?

This report presents the results of a research study started in late 2014 by the Sanad Fund for MSME’s Technical Assistance Facility and CGAP to confirm or refute indications of cross- and over-indebtedness of microfinance borrowers in Lebanon. The study included an analysis of loan and income data for 1,200 microfinance institution (MFI) borrowers, verified against the Central Bank’s credit registry.

The study found that 29 percent of borrowers were simultaneously repaying loans to two institutions or more, and that 19 percent  of clients were in fact banked, repaying loans to an MFI and a bank. The study also evidenced that a third of borrowers spend over 50 percent  of their net income servicing debt, with 10 percent being insolvent. Loan repayment remained however satisfactory overall, and MFIs did not appear to relax underwriting procedures. The study did not cover all formal and informal lending sources, so actual levels of cross- and multiple borrowing might be higher.

Based on these findings, the report calls for coordinated efforts to monitor indebtedness levels on a regular basis, and offers opportunities for further research to better understand borrowing patterns and debt burdens of Lebanon’s low-income borrowers.

Disclaimer

This work was funded in whole or in part by CGAP. Unlike CGAP's official publications, it has not been peer reviewed or edited by CGAP, and any conclusions or viewpoints expressed are those of the authors, and they may or may not reflect the views of CGAP staff.