Thursday, September 10, 2009

What factors affect loan funding times?

Hi All,

Please find below some fairly rudimentary analysis into what factors affect loan funding times.

A lot of the findings confirm what many of us would probably have expected - for example, that an African woman in agriculture will tend to get funded more quickly than a Central Asian male taxi-driver...

...However, there are also some more surprising learnings - for example:

  • Single entrepreneurs are funded relatively more slowly than group loans
  • On average, the length of the description does not appear to affect funding time, although the "quality" of the description does
  • Entrepreneurs that look affluent seem less likely to be funded quickly
  • Lower partner risk ratings do not appear to deter lenders
  • The quality of the photo does not appear to have a significant effect on funding time, but the inclusion of a video does speed up funding time
  • And smiling helps :)

Also, while it does not challenge the idea that an African loan will get funded more quickly than a Central Asian loan, this analysis does raise some questions around the extent to which these differential funding rates are determined by geography, as opposed to being caused by the types of loans prevalent in these regions. For example, more African loans have historically been to groups of women in agriculture (which all fund quickly), whereas more Central Asian loans have historically been to single men in the transportation or retail sectors (which all fund slowly). The question of whether it is predominantly geography, gender, group size or sector that is driving the differential funding rates is left largely unanswered by this presentation, but it does seem clear that there are several things that an MFI in a "less attractive" region can do to improve their rates of funding - some ideas on this are set out in the final section of the presentation.

I hope it's interesting - any thoughts or suggestions welcome!