Abstract

GIANNATALE, Sonia Di et al. The Role of Cognitive and Personality Characteristics in Timely Microcredit Repayment: Evidence from a Survey Conducted by Provident, Mexico. Ens. Rev. econ. [online]. 2020, vol.39, n.1, pp.1-20.  Epub Apr 12, 2021. ISSN 2448-8402.  https://doi.org/10.29105/ensayos39.1-1.

Sustainability of microfinance institutions depends, among other factors, on having appropriate repayment levels. This article’s contribution to existing literature is the analysis of the role of a personality trait named “grit” in individual microcredit repayment decisions, alongside cognitive characteristics and time and risk preferences. This study is based on a survey of a sample of clients at 'Provident México', a formal microfinance institution that provides personal loans in vulnerable communities in Puebla, Mexico. We find evidence that, generally, older individuals possessing higher levels of grit and a tendency toward short term present bias are more likely to show no delays in loan repayments. Cognitive characteristics are inversely related to paying microcredits on time. Refinancing incentives does not play a key role in timely microcredit repayment, a result that is contrary to related literature but consistent with our finding that individuals in this sample that do not have delays in repayments are characterized by showing a short term present bias.

Keywords : Microcredit repayment; Personality traits; Grit; Cognitive characteristics; Time and risk preferences.

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