Monday, April 26, 2010

Connected we succeed, divided we default

At Madura Microfinance, one of our primary assumptions is that women who are more informed and better connected will be more successful and make more productive use of loans. So, much of our efforts are aimed at increasing networks and access to information among our members. A PhD Student from Oxford, Sangamitra Ramachander, recently studied our women’s borrower groups to see what kind of factors predicted whether a group went successfully on to the next higher level loan or would default. This is still a work in progress but there are some very interesting results. Here is one odd one that stood out to me. She found that women that travelled more frequently to neighbouring villages (but surprisingly not the nearest towns) were several times more likely to be successful rather than default. It’s not clear whether this factor is causal or the outcome of their success but it’s something worth exploring further. Possibly, women who travel more to neighbouring villages are more informed about local markets and better connected within them?


  1. It's an interesting correlation. Is she more successful because she happens to travel more, and hence is better connected? Does her loan enable her to travel more, and travel leads to connections? Or is the kind of person who travels more the kind of person who makes more of her loan by some third cause? The last of these is worth exploring as well.

  2. Agree its worth exploring. My best guess is that its a feedback loop catalyzed by the loan. She's more connected so she's more successful. A loan gives her more opportunity to increase her connectedness and therefore her success or the other way around and so on..

  3. If we are talking about capability of repaying loan, then travel most likely has helped the women get the necessary contacts to better their business prospects (example sell their agricultural procude etc, but understanding the larger demand scenario).

    When you have better business prospects, you make more money and are able to return the loans faster.