The Microfinance Contagion Scenario

Harvard Business Review

But as information trickles out about how bad the repayment situation in AP is, a plausible global contagion scenario is emerging. In other words, at current repayments rates, any MFI with more than 12% of its portfolio in AP is at risk of insolvency. The AP crisis and the virtually certain (at least) nominal debt default sends a message to global capital markets: the debt-to-equity ratios in the microfinance industry were too high.