Repayment under flexible loan contracts

Evidence based on high‐frequency data

Bibliographic Data

ID9727712
AuthorsAntonia Grohmann (0000-0001-5330-4583, Aarhus University), Friederike Lenel (0000-0002-2833-6222, University of Göttingen and Potsdam Institute for Climate Impact Research, corresponding author), Steffen Herbold (0000-0001-9765-2803, University of Passau)
Year2025
Volume93
Issue369
Pages160-187
Publication date2025-10-22
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherWiley (PUBLISHER • GB)
DOI10.1111/ecca.70013
OpenAlexW4415420751
LanguageEN
References cited29

We study repayment in the context of an alternative financial product that enables the purchase of a large asset—a solar panel home system—while offering complete repayment flexibility. Using a large administrative dataset on daily repayment of 38,400 borrowers in Tanzania over 5.5 years, we perform unsupervised pattern analysis to classify repayment behaviour. We show that borrowers with fluctuating incomes make more use of the loan's flexibility, and adjust their repayment to cash flow. In further analysis, we show that in particular, farmers use the flexibility provided by the loan contract to adjust to seasonal fluctuations and to deal with unexpected shocks. Our results indicate that low‐income households can finance large assets through innovative financial approaches that allow aligning payments to financial circumstances

Cash · Context (archaeology) · Flexibility (engineering) · Loan · Payment · Product (mathematics) · Banking stability, regulation, efficiency · Housing Market and Economics · Microfinance and Financial Inclusion

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