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Author: Sam Mendelson

Overindebtedness is like the unwelcome spectre at the feast. Amidst robust and exciting discussions about technology, product development, distribution innovations, client protection and rural finance at a conference like European Microfinance Week, overindebtedness is always there – hovering. It’s the underlying trigger of market crises. It’s what outsiders who’ve read a few alarmist headlines think about microfinance.

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Author: Daniel Rozas

My latest post on the credit bubble in Mexico had one especially interesting comment. Jose Manuel asked to consider the loan sizes in the country as a factor that might explain the prevalence of multiple borrowing.

The comment is highly relevant. What Jose Manuel suggests is that loans in Mexico are unusually small. And in a way, he is right. On a per capita GNI basis, Mexico's loans are smaller than in any other country. By contrast, India's loans are nearly three times larger. This has two potential implications: first, small microfinance loans put less of a burden on Mexican borrower incomes, and second, their inadequate size encourages clients to borrow from multiple lenders in order to meet their requirements. And yet, I find that both implications are incorrect and that multiple borrowing levels in Mexico continue to point to a very large bubble.

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Author: Daniel Rozas

Last week, as its football team was preparing for its match with the Netherlands, Mexico hosted the International Forum for Financial Inclusion. It was an important event, opened by the President of Mexico, Enrique Peña Nieto, and attended by such notables as Christine Lagarde. By all accounts, it was an excellent meeting where representatives of financial regulators from around the world shared their experiences and strategies to promote financial inclusion in their countries.

But one thing stood out.

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Author: Daniel Rozas

You know the game of musical chairs: players sit on chairs arranged in a circle. The music starts and the players start circling – dancing, running – while chairs are progressively removed. Then the music stops and chaos erupts as the players seek to find a place to sit.

In Mexico, the number of chairs remaining is few indeed, even as the MFIs continue to dance. The recently published study by the Microfinance CEO Working Group shows just how few chairs are left.

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Author: Daniel Rozas

Or the more things change, the more they stay the same...  Sometimes it seems as though there is no shortage of proverbs when it comes to looking at the seemingly inevitable credit business cycle. In my last blog I took a look at the unprecedented stability of the US banking sector during the 50 years following the Great Depression.