Determinants of Microcredit Repayment: The Case of Tunisian Microfinance Bank

Repayment of loans in microfinance is a very important subject for study. Microfinance institutions lend to poor and low-income borrowers and thus the terms of lending should be as easy as possible for more poor people to have access. On the other hand, poor and low-income borrowers tend to have no collateral and thus would constitute a considerable risk to lenders once they default. Lenders, therefore, have to devise a special system whereby to ensure that loan defaults are as low as possible in order to avoid charging a higher interest rate which will defeat the very purpose of microfinance-lending. In this paper, using a binary logistic regression model, we undertake to examine the factors that affect default among borrowers. It has been discovered that borrowers' socio-demographic characteristics, past participation in microcredit loans and past credit history have significant impacts, as special features, on their default rates.