Preventing Crisis: Can you recognize overheating markets?

  • 29 Feb 2016
  • Deutsche Bank Trust Co America (60 Wall St.)

Industry Conversation and Networking

When to say "when"? Credit saturation and overindebtedness in microfinance:
Like all debt markets, microcredit is susceptible to the credit cycle, as described by Hyman Minsky: success leading to excess leading to crisis leading to recovery. During 2008-10, repayment crises in Bosnia, Nicaragua, Morocco and Andhra Pradesh underscored the point. But knowing that the sector follows the credit cycle is not enough. The bigger question is how to identify where along that cycle the markets are located.
Thus far, the microfinance sector has had limited means by which to measure and thus manage credit saturation and the attendant risk of overindebtedness. The MIMOSA project aims to fill this gap. Its standard framework for measuring credit capacity, penetration, and related risks/mitigants has been applied in 7 pilot markets and is currently being scaled up to cover 20-30 of the key microfinance markets around the world. 
Spend an evening with Daniel Rozas, co-creator of MIMOSA, and learn what causes some microfinance markets to take on excessive growth, how this is similar to other credit markets, and how to recognize the warning signs. After working in the US mortgage industry during 2001-08, Daniel became one of the foremost experts on market overheating and accurately described the growing microfinance bubble in Andhra Pradesh a year before the 2010 crisis.

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