An Analysis of Repayment Among Clients of the Microfinance Institution Esperanza International, Dominican Republic

Abstract

This research considers default among borrowers of Esperanza International, a microfinance institution in the Dominican Republic. Though Esperanza holds high repayment rates, it is of value to examine the 3 to 5 percent of clients that have not had success with the program. If success is defined as repayment and can be correlated with socioâ€economic characteristics, it may point towards the development of remedial programs and/or interventions. In coordination with organizational interests, this study examines 15,104 loans divided amongst 8,991 borrowers between April 2005 and October 2007. Default for each loan (defined as the failure to repay any quota for 120 days) is considered against gender, marital status, number of dependents, level of education, age, size of loan, type of microenterprise, and regional office. Results of a first linear regression indicate that regional office is most important among included variables. This is followed by education, gender, and marital status †with women, those with less education, and those classified as cohabitating defaulting less often. A second linear regression indicates that an alternate categorical division of microenterprise does not improve the variable’s significance. Two final regressions consider default separately among borrowers that were and were not identified as Dominicanâ€Haitian. These results showed that Dominicanâ€Haitians defaulted least often when widowed or married, and defaulted most often at the Santo Domingo office. Overall these results call for further investigation, particularly into dissimilarities among Esperanza’s various branches.Financial Economics,