Indemnified Loan Study
The majority of the borrowers from rural MFIs are employed in the agricultural sector. Defaults rates for these clients are often triggered by price declines and/or crop failures. The combination of these factors deters small scale farmers from accessing credit that could help them expand their productive base, and escape a so-called poverty trap. We are working with Mumuado Bank to design a product that protects the client against price risk and/or crop failure. Such a product has the potential to increase loan take-up, attract good borrowers, and increase repayment rates. In short, a new financial product that takes into account these risk factors could deepen the market for credit in the rural areas and enhance the profitability of rural MFIs.
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