Indebtedness of microcredit clients in Azerbaijan
Following the research conducted in Bosnia and Herzegovina and Kosovo, the EFSE Development Facility, the technical assistance arm of the European Fund for Southeast Europe, commissioned a study in 2011 to assess indebtedness levels of microcredit clients in Azerbaijan.
The objectives of the study were:
- to gain an understanding of the level of indebtedness and underlying borrowing patterns of microcredit clients,
- to identify factors on both the demand and supply side that have led to or prevented over-indebtedness, and
- to provide recommendations on how to address and prevent over-indebtedness in the country.
The analysis is based on a sample of 1,100 loan customers of eight microcredit providers (six leading microfinance institutions and two banks). The sample was drawn up proportionally, reflecting each institution’s share of the microcredit market. Given the coverage of participating institutions, the results represent 82% of the microcredit market in terms of the number of borrowers.
The study focused on quantitative research, which included a survey among microcredit clients. The data was supplemented with secondary data from client profiles at participating institutions. The level of indebtedness was assessed using two measures: i) debt service payments in relation to net income (net indebtedness index); and ii) the perception of debt burden. In addition, the study investigated factors that influence indebtedness levels on the supply side. For this purpose, interviews were conducted with representatives and staff of the participating microcredit providers.