This paper formulates an objective mathematical model for a Microfinance Institution (MFI) to measure the credit worthiness associated with a potential client. We use concepts from network theory to determine the credit worthiness of an individual in relation to other households in the community. We use the concept of eigenvector centrality to evaluate the relative credit worthiness in the network. The latter part of the model focuses on the absolute measures of credit worthiness such as income, ownership of assets and risk of the proposed investment. This model would help MFIs reduce the risk of borrowing by ensuring that there is a objective basis for lending to its clients.
Mitra, Sayantan and Newar, Varunavi
"Helping a Microfinance Institution Select its Clients: A Risk Analysis using Social Networks,"
Black & Gold:
Available at: https://openworks.wooster.edu/blackandgold/vol1/iss1/6
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