Mr. Ronald Chua of the Asian Institute of Managment shares the findings of the Study on Multiple Lending and the Challenges Faced by Banks during the 2012 RBAP-MABS National Roundtable Conference on June 8.

1. Session
3:
Results
of
the
Study
on
Mul0ple
Lending
and
the
Challenges
Faced
by
Banks
Ron Chua
Asian Institute of Management
2012 RBAP-MABS National Roundtable Conference
June 7-8, 2012
Hyatt Hotel & Manila

2. Mul-ple
Borrowing
among
Microfinance
Clients
Results
from
an
Area
Study
Prepared
by
Ronald
T.
Chua
and
Erwin
R.
Tiongson
April
18,
2012

3. This
is
a
heroic
a?empt
at
a
summary
SUMMARY

4. Caveat
• This
is
not
naConally
representaCve
• This
is
from
cross-­‐secConal
data
that
mask
the
changes
over
Cme
• The
data
are
subject
to
error
• Data
are
from
mulCple
sources
and
not
fully
consistent

5. Summary
and
Concluding
ObservaCons
• Mul-ple
borrowing
exists,
it
exists
in
various
forms,
and
is
not
small.
Though
the
data
sources
cannot
be
fully
consolidated,
they
suggest
the
following
incidence,
along
several
dimensions:
o 5
percent
if
mulCple
borrowing
means
taking
out
mulCple
loans
from
the
same
MFI
o 14
percent
if
mulCple
borrowing
means
borrowing
from
several
MFIs,
though
there
is
substanCal
variaCon
across
MFIs
o 77
percent
if
mulCple
borrowing
means
borrowing
from
one
MFI
as
well
as
from
any
other
source
of
finance

6. Summary
and
Concluding
ObservaCons
• Mul-ple
borrowers
take
out
mul-ple
loans
for
a
variety
of
reasons.
Some
report
that
a
single
loan
is
insufficient
to
pay
for
a
major
consumpCon
expenditure
or
to
invest
in
a
business
acCvity.
Some
are
aUer
the
auxiliary
services
a?ached
to
various
loans.
• We
are
unable
to
find
a
dis-nc-ve
sta-s-cal
profile
of
mul-ple
borrowers.
There
is
some
evidence
to
suggest
that
they
are
older
and
are
on
longer
loan
cycles,
but
otherwise
there
is
(to
date)
no
strong
staCsCcal
links
between
mulCple
borrowing
and
individual
demographic
characterisCcs
as
well
as
characterisCcs
of
the
loan
itself
(size,
loan
cycle,
reported
loan
use).

7. Summary
and
Concluding
ObservaCons
• There
is
no
evidence
that
mul-ple
borrowing
is
associated
with
delinquent
payment,
at
least
not
among
the
acCve
clients.
• This
should
be
interpreted
with
cau-on.
This
indicates
the
average
observable
outcome
to
date.
We
are
unable
to
say
anything
meaningful
about
the
likelihood
of
falling
into
delinquency.
There
are
large
differences
in
the
availability
of
informaCon
on
missing
payments
and
the
data
are
not
fully
consistent
across
MFIs.
Furthermore,
the
sample
represents
a
parCcular
urban
community.
It
is
not
clear
whether
this
relaConship
holds
more
generally.

8. 1.
Branch
Client
Data
SELECTED
RESEARCH
FINDINGS

9. Branch
Client
Data:
Selected
Results
14
percent
Incidence
of
Mul-ple
Borrowing
• On
average,
14
percent
of
MFI
clients
• SubstanCal
variaCon
across
MFIs
(4-­‐26
percent)

10. Branch
Client
Data:
Selected
Results
Incidence:
Within-­‐MFI
Mul-ple
Borrowing
• “Within-­‐MFI”
mulCple
borrowing
also
exists,
i.e.,
mulCple
loans
from
the
same
MFI
• Most
cases
appear
to
be
known
to
the
MFI
• Some
may
not
be
known
(borrowing
from
several
branches)
• On
average,
where
they
exist,
within-­‐MFI
mulCple
borrowers
represent
5
percent
of
all
MFI
clients
• Some
overlap
with
mulCple
borrowing
as
defined
previously
(14
percent)

11. Branch
Client
Data:
Selected
Results
Number
of
Loans
• Most
mulCple
borrowers
have
loans
from
only
2
MFIs
• About
15
percent
of
mulCple
borrowers
have
loans
from
3
or
more
MFIs

12. Branch
Client
Data:
Selected
Results
Share
of
Outstanding
Loans
• Loan
sizes
tend
to
be
uniform.
As
a
result,
the
share
of
loans
accounted
for
by
mulCple
borrowers
tend
to
be
proporConal
to
the
incidence
of
mulCple
borrowing
(14
percent)
• However,
among
mulCple
borrowers
who
also
take
out
mulCple
loans
from
the
same
MFI
(within-­‐MFI
mulCple
borrowing),
their
share
of
all
outstanding
2nd
or
3rd
loans
within
the
same
MFI
tends
to
be
large
(40
percent).

13. Branch
Client
Data:
Selected
Results
Correlates
• In
general,
no
strong
evidence
linking
mulCple
borrowing
to
specific
lengths
of
membership,
loan
cycles,
client
age,
and
other
demographic
pa?erns.
• There
are
some
suggesCve
pa?erns.
• MulCple
borrowers
with
two
or
three
loans
tend
to
be
on
longer
loan
cycles.
• MulCple
borrowers
also
tend
to
be
somewhat
older

14. Branch
Client
Data:
Selected
Results
Delinquency
• There
is
no
evidence
that
mulCple
borrowing
is
associated
with
delinquent
payment,
at
least
not
among
the
acCve
clients.
• This
should
be
interpreted
with
cauCon.
This
indicates
the
average
observable
outcome
to
date
and
does
not
at
all
address
the
possible
impact
of
economic
or
income
shocks
and
whether
mulCple
borrowers
can
fall
into
delinquency
as
a
result.
• There
are
large
differences
in
the
availability
of
informaCon
on
missing
payments.
The
data
are
not
recorded
consistently
across
MFIs.
• May
reflect
business
opportuniCes
in
a
parCcular
urban
community.
The
economics
may
differ
in
other
communiCes,
including
rural
communiCes.

15. 2.
Household
Survey
SELECTED
RESEARCH
FINDINGS

16. Household
Survey:
Selected
Findings
57
percent
of
Percent
of
Indebted
Households
households:
at
least
one
(By
source,
in
percent
of
all
households)
outstanding
loan
All 57.0
MFIs 6.8
Private
commercial
banks 2.5
Lending
investor 6.4
Only
6.8
percent
of
Private
moneylender 9.3
households
are
MFI
clients
Pawnshop 1.9
Government
banks 0.8
SSS 16.6
Employer 7.3
Family,
friends 24.5
Store 23.8
Credit
card 3.1

17. Household
Survey:
Selected
Findings
Distribution
of
Households
(By
level
of
indebtedness)
Multiple
debt
32% No
debt
43%
This
chart
refers
to
all
households.
Of
the
MFI
client
households
alone,
77
percent
are
Single
debt
“mulCple
borrowers”,
25%
all
sources
of
finance
considered.

18. Household
Survey:
Selected
Findings
Multiple
Borrowers Multiple
Borrowers
among
MFI
Clients
(By
number
of
loans) (By
number
of
loans)
5+
loans
12% 5+
loans 2
loans
24% 29%
4
loans
16% 2
loans
47% 4
loans
9%
3
loans
25% 3
loans
38%
These
charts
show
mul-ple
borrowers
by
number
of
loans
(all
sources
of
finance
considered)
•
For
mulCple
borrowers
as
a
group,
52
percent
have
3
or
more
loans.
•
For
mulCple
borrowers
MFI
clients
as
a
group,
71
percent
have
3
or
more
loans

19. Household
Survey:
Selected
Findings
Multiple
Borrowing:
Self-­‐Reported
Loan
Use
One
loan
is
insufficient
to
start
or
expand
business.
11%
One
loan
is
insufficient
to
pay
A
recent
shock
for
a
major
(illness,
death,
job
consumption
loss)
expenditure,
etc. 16%
46%
Part
of
the
loan
was
used
to
pay
for
tuition
Part
of
the
loan
8%
used
to
pay
off
existing
debt
19%

20. Household
Survey:
Selected
Findings
How
Many
Times
Did
You
Miss
Payments
The
Last
3
Months?
All
Indebted
Households Multiple
Borrowers
Twice
or
more
10%
Once Twice
or
7% more
13%
Once
9%
Zero Zero
83% 78%
There
is
no
evidence
that
mul-ple
borrowing
is
associated
with
higher
delinquency,
compared
with
average
indebted
household.
•
Caveat:
based
on
self-­‐reported
informaCon
•
This
is
from
cross-­‐secConal
informaCon
or
informaCon
from
a
single
point
in
Cme

21. 3.
Focus
Group
Discussions
SELECTED
RESEARCH
FINDINGS

22. FGDs:
Selected
Findings
• ParCcipants
consisted
of:
o MFI
members
known
or
who
have
admi?ed
to
having
loans
from
at
least
one
other
MFI
o Branch
staff
• MFI
clients
were
selected
by
MFI
staff.
Only
criterion
was
that
they
have
borrowed
or
have
current
loans
from
at
least
two
MFIs
• Each
group
consisted
of
8
to
12
discussants

23. FGDs:
Selected
Findings
Profiles
of
FGD
parCcipants
• A
number
of
parCcipants
are
center
chiefs
or
group
leaders
in
the
MFIs
• Have
had
many
years
of
borrowing
experience
• Long
Cme
residents
of
Commonwealth
(one
had
been
resident
in
area
for
30
years)
Borrowing
behavior
reported
• Borrowed
sequenCally
from
several
MFIs
• Borrowed
simultaneously
several
MFIs

24. FGDs:
Selected
Findings
On
prolifera-on
of
lending
sources
• Clients
observed
that
there
has
been
an
increase
in
the
number
of
lenders
in
the
area
recently,
as
recent
as
the
past
year
(2010-­‐2011)
• Clients
appreciated
the
availability
of
more
choices
• Some
cited
concerns
about
their
own
inability
to
repay
so
expressed
preference
to
stay
with
one
MFI
Reasons
for
borrowing
from
mul-ple
sources
• To
maximize
benefits.
No
one
single
MFI
offers
a
whole
range
of
• Obtain
sufficiently
large
consolidated
loan
from
several
MFIs
as
one
MFI
loan
is
not
sufficient
for
their
needs
• To
meet
emergency
needs
• To
try
out
other
sources
• To
stagger
payments
(mulCple
loans
from
the
same
MFI
are
paid
on
the
same
day;
mulCple
loans
from
mulCple
loans
can
be
staggered)

25. Lenders Identified by FGD Participants
FGD
1&2
FGD
3&4
FGD
5&6
MFI
Staff
8
10
8
45