Why do Microfinance Clients Take Multiple Loans?

by Venkat Attaluri and Veena Yamini
Feb 4, 2010
1 min

This Note presents the rationale and impact for multiple borrowings from a client perspective and discusses how the MFI and its leaders perceive the issue and its implications.

This Focus Note (a) presents the rationale and impact for multiple borrowings from a client perspective; and (b) discusses how the MFI and its leaders perceive the issue and its implications. It is difficult to attribute multiple borrowings just to unmet demand for credit from borrowers, or to dumping of loans by the MFIs on clients well versed with the MFI methodology. However, MFIs can reduce the incidence of multiple borrowing. The appropriateness of disbursement timing can be improved through studying microenterprise cash flows by type, and changing operational policies to reduce mismatches between client cash flows and the timing of loan cycles.