Loan structure preferences among microenterprise owners: Experimental evidence from Yangon, Myanmar
Keywords:
microfinance institutions, microenterprises, loan structure, risk aversion, conjoint experimentAbstract
Despite the important role of microfinance institutions (MFIs) in financial inclusion, a critical barrier persists for microenterprises (MEs) in developing economies: a misalignment between the loan structures offered by MFIs and the preferences of ME owners. This study uses a conjoint experiment with 1,009 microenterprise owners in Myanmar to evaluate how their preferences for microfinance loan structures are influenced by two key attributes: (i) loan period (short-/long-term loans) and (ii) loan type (individual/group loans), within the Resource-Based View (RBV) framework. Furthermore, we investigate how these preferences are shaped by the ME owners' levels of risk aversion. Results show that microenterprise owners, on average, favor short-term and individual loans over long-term and group loans. This study also reveals substantial roles of microenterprise owners’ risk aversion levels in determining their preferences particularly for loan periods. Microenterprise owners with low risk aversion prefer short-term loans, whereas those with high risk aversion prefer long-term loans.
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