My Santa Clara University research team and I have recently gotten our microfinance article published in the inaugural volume of the Journal of International & Interdisciplinary Business Research.

For the uninitiated, microfinance was intended as a form of poverty alleviation to lend to projects and enterprises who could not qualify for traditional loans or could not handle the high interest rates (in some countries, 200% per annum is not unusual).  There are reportedly over 12,000 Micro Finance Institutions (MFIs) around the world today (MIX Market Database).

Historically, lenders have still been able to enjoy great interest rates, and default rates have overall been impressively low.  However, in recent times, default rates have slowly cropped up in some locations around the world, and there is concern that higher interest rates to compensate for growing defaults could lead to a vicious circle.

Using the massive MIX Market Database of over 1,000 Micro Finance Institutions, we have employed linear regression and Granger causality to find that loan-loss rates have driven yield rates more than the inverse (in English, you could loosely say that lenders have been more sensitive to raising rates in the face of defaults than borrowers have been in defaulting in the face of higher rates).  We infer that borrowers (who are mostly female, by the way) have been blithely accepting costly terms or still lack financing alternatives for bargaining power.

I would like to thank my teammates and supervising professor for this opportunity to put data analysis to use in a wonderful humanitarian topic:

• Dr. Hoje Jo, Finance, Santa Clara University
• Andrea Joyce
• Kathryn Leahy
• Casey Pack
• Jeffrey Tucker