Microfinance is widely recognized as a powerful method for poverty
alleviation. However, little is known about the characteristics of those who
default on their loans. Understanding the behavior of borrowers is an important
component of mitigating adverse selection and the moral hazard of lending. Both
of these concepts embody some of the greatest challenges faced by microfinance
institutions, and they provide the major motivation for this study. Accordingly,
the main objective of this research is to investigate whether non-delinquent
borrowers and delinquent borrowers of a microfinance institution reveal any
difference in their level of risk preference and time preference. This is tested
through an artefactual field experiment with 97 borrowers from the National
Microfinance Bank of the Hashemite Kingdom of Jordan. In the experiment,
participants chose between six choices that measure their level of risk preference.
In addition, participants selected a voucher that varies both in time and in value
to capture their time preference levels. The results reveal that non-delinquent
borrowers are more likely to be risk-seeking and impatient individuals when
compared to delinquent borrowers, contradicting current literature on risk
preference and time preference.
","abstract_html":"<p> Microfinance is widely recognized as a powerful method for poverty</p> <p>alleviation. However, little is known about the characteristics of those who</p> <p>default on their loans. Understanding the behavior of borrowers is an important</p> <p>component of mitigating adverse selection and the moral hazard of lending. Both</p> <p>of these concepts embody some of the greatest challenges faced by microfinance</p> <p>institutions, and they provide the major motivation for this study. Accordingly,</p> <p>the main objective of this research is to investigate whether non-delinquent</p> <p>borrowers and delinquent borrowers of a microfinance institution reveal any</p> <p>difference in their level of risk preference and time preference. This is tested</p> <p>through an artefactual field experiment with 97 borrowers from the National</p> <p>Microfinance Bank of the Hashemite Kingdom of Jordan. In the experiment,</p> <p>participants chose between six choices that measure their level of risk preference.</p> <p>In addition, participants selected a voucher that varies both in time and in value</p> <p>to capture their time preference levels. The results reveal that non-delinquent</p> <p>borrowers are more likely to be risk-seeking and impatient individuals when</p> <p>compared to delinquent borrowers, contradicting current literature on risk</p> <p>preference and time preference.</p>","abstract_has_math":false,"creators":["Start, Nike"],"institution":null,"degree_name":"Master of Arts in International and Development Economics","degree_level":"Thesis","degree_discipline":"Economics","degree_department":null,"school":null,"contributors":["Dr. Bruce Wydick"],"advisors":[],"committee_chairs":[],"committee_members":[],"year":2013,"date_issued":"2013-04-01T07:00:00Z","date_published":"2013-04-01T07:00:00Z","updated_at":"2026-07-24T05:42:43Z","subjects":["Risk-Aversion","Time Preference","Microfinance","Experimental Economics","Jordan","Borrowing Behavior","Behavioral Economics","Other Economics"],"languages":[],"rights":[],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"https://repository.usfca.edu/thes/67","outbound_label":"Repository record","outbound_source":"dc:identifier"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor","label":"Contributor","values":["Dr. Bruce Wydick"]},{"key":"dc:creator","label":"Author","values":["Start, Nike"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date.available","label":"Dc Date Available","values":["2013-07-28T07:00:00Z"]},{"key":"thesis:degree_discipline","label":"Discipline","values":["Economics"]},{"key":"thesis:degree_level","label":"Degree Level","values":["Thesis"]},{"key":"thesis:degree_name","label":"Degree Name","values":["Master of Arts in International and Development Economics"]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["Risk-Aversion","Time Preference","Microfinance","Experimental Economics","Jordan","Borrowing Behavior","Behavioral Economics","Other Economics"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier","label":"Identifier","values":["https://repository.usfca.edu/thes/67"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description.abstract","label":"Abstract","values":["Microfinance is widely recognized as a powerful method for poverty
alleviation. However, little is known about the characteristics of those who
default on their loans. Understanding the behavior of borrowers is an important
component of mitigating adverse selection and the moral hazard of lending. Both
of these concepts embody some of the greatest challenges faced by microfinance
institutions, and they provide the major motivation for this study. Accordingly,
the main objective of this research is to investigate whether non-delinquent
borrowers and delinquent borrowers of a microfinance institution reveal any
difference in their level of risk preference and time preference. This is tested
through an artefactual field experiment with 97 borrowers from the National
Microfinance Bank of the Hashemite Kingdom of Jordan. In the experiment,
participants chose between six choices that measure their level of risk preference.
In addition, participants selected a voucher that varies both in time and in value
to capture their time preference levels. The results reveal that non-delinquent
borrowers are more likely to be risk-seeking and impatient individuals when
compared to delinquent borrowers, contradicting current literature on risk
preference and time preference.
"]},{"key":"dc:title","label":"Title","values":["Why Risk It? The Effect of Risk and Time Preferences on Microfinance Loan Default"]}]}],"canonical_facts":{"dc:contributor":["Dr. Bruce Wydick"],"dc:creator":["Start, Nike"],"dc:date.available":["2013-07-28T07:00:00Z"],"dc:description.abstract":["Microfinance is widely recognized as a powerful method for poverty
alleviation. However, little is known about the characteristics of those who
default on their loans. Understanding the behavior of borrowers is an important
component of mitigating adverse selection and the moral hazard of lending. Both
of these concepts embody some of the greatest challenges faced by microfinance
institutions, and they provide the major motivation for this study. Accordingly,
the main objective of this research is to investigate whether non-delinquent
borrowers and delinquent borrowers of a microfinance institution reveal any
difference in their level of risk preference and time preference. This is tested
through an artefactual field experiment with 97 borrowers from the National
Microfinance Bank of the Hashemite Kingdom of Jordan. In the experiment,
participants chose between six choices that measure their level of risk preference.
In addition, participants selected a voucher that varies both in time and in value
to capture their time preference levels. The results reveal that non-delinquent
borrowers are more likely to be risk-seeking and impatient individuals when
compared to delinquent borrowers, contradicting current literature on risk
preference and time preference.
"],"dc:identifier":["https://repository.usfca.edu/thes/67"],"dc:subject":["Risk-Aversion","Time Preference","Microfinance","Experimental Economics","Jordan","Borrowing Behavior","Behavioral Economics","Other Economics"],"dc:title":["Why Risk It? The Effect of Risk and Time Preferences on Microfinance Loan Default"],"thesis:degree_discipline":["Economics"],"thesis:degree_level":["Thesis"],"thesis:degree_name":["Master of Arts in International and Development Economics"]},"updated_at":"2026-07-24T05:42:43Z"}