The Microfinance Contagion Scenario
Harvard Business Review
JUNE 10, 2011
In other words, at current repayments rates, any MFI with more than 12% of its portfolio in AP is at risk of insolvency. In a recent paper, Jonathan Morduch and Jonathan Conning explain the role of debt and equity financing in the microfinance industry. In microfinance, just as in corporate finance, one of the key ratios driving investors is the debt-to-equity ratio. At the prevailing ratios, management failed to act prudentially.