| This study seeks to determine why some microfinance institutions have high default rates, while others have low ones. Three literature-based hypotheses regarding default reduction were tested on communal credit enterprises (CCEs) of a poverty-focused microfinance program called FINCA Costa Rica. Specifically, five CCEs in the Osa region, and one CCE (not within the Osa) created by FINCA CR. Four financially healthy CCEs that have low default rates were compared with the one that is at a high-risk for failure, to determine what exactly caused this to happen when so many variables were controlled. It is hypothesized that more group unity, better training programs, and more discipline will reduce defaults within microfinance institutions. Results show that group unity was not associated with low default rates, while better training programs and discipline were. The results also show that because of important limitations in this study, additional research is needed in order to provide more reliable results. |
