Who is the "marginal" client of MFIs and why do they repay?

Project Guide: Prof. Sendhil Mullainathan (Harvard)
Partner Organizations: Gramuthan and Swayanshree, Orissa
CMF Intern: Guadelupe Bedoya
Timeline: Completed in August 2006

This project focused on two topics: 1) who is the marginal client of MFIs and 2) why clients repay. Below we provide more detail on the key study questions.

1) Who is the marginal client? - In many areas, the penetration rate of MFIs is far from 100%. Who are the clients that demand microfinance services, and what are the characteristics of people who do not? What is the motivation for clients taking up loans? How much do social networks matter? What elements determine different rates of penetration?

2) Why do they repay? - One of the “puzzles” of microfinance is why people repay so well. Why do they repay, and how?

This short qualitative study addresses these issues through individual interviews and focus group discussions in two MFIs in Orissa, one rural and one urban. Through these interviews and focus group discussions, this paper enters the world of groups and provides invaluable documentation on group dynamics, the difficulties people face to repay and the ways in which they face them.

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