An Empirical Analysis of Over-Indebtedness Drivers in Microfinance at the Borrower Level in Bukavu, Democratic Republic of Congo
Microfinance institutions have been created to help poor people especially women to be independent and thereby eradicate poverty in developing countries. However, many researchers have revealed meaningful gap between the purpose of microfinance institutions and its practical achievements. Microfinance institution are being accused of impoverishing people through debt. This study, therefore sought to shed light by investigating the drivers of over-indebtedness in microfinance on the borrower level in Bukavu, Democratic Republic of Congo. The study focused on the sociological factors as well as the borrower factors which drive customers into the trap of over-indebtedness. The primary data on these variables was collected through a questionnaire. The data was analyzed using univariate and multivariate analysis including descriptive statistics, correlation analysis, and test of differences between means as well as the logistic regression. Among the sociological influences, the social pressure and the use of loan in nonproductive activities have been found to be positively and significantly associated to over-indebtedness. Among the borrower factors, the study found that the source of credit, the number of loans and the Net-Indebtedness-Index had a positive and significant effect on over-indebtedness while the diversification of activities, the monthly income the number of assets, and the financial literacy had negative and significant association with over-indebtedness. The study found no significant relationship between the loan amount and over-indebtedness. The study recommends to the borrowers to avoid over-borrowing because of social pressure and allocating the loan amount to nonproductive business, to ensure diversification of their activities and to continually reinforce their financial management skills.
Keywords: Over-Indebtedness, Drivers, Microfinance, Borrower Level, Bukavu, Democratic Republic of Congo
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