The Role of Entrepreneurial Motivation and Repayment Performance on Microcredit Terms

Since its modern form, microcredit has been deemed as a viable instrument to alleviate poverty. Popularized in poor countries, its value has grown worldwide, and it is being applied in developing and developed countries. Our research investigates the role of entrepreneurial motivationEntrepreneurial motivation and repaymentRepayment performancePerformance on credit terms in the context of the Portuguese microcreditMicrocredit industry. Using a 2,060-microcredit loan between 1999 and 2015, our results show that the Portuguese microcreditMicrocredit industry tends to lend higher amounts of credit with longer maturitiesMaturity to entrepreneursEntrepreneur with a lower likelihood of repaymentRepayment (entrepreneurs moved by necessityNecessity). The focus on these riskier entrepreneursEntrepreneur led us to confirm the argument that MC is a prosocial instrument, following its initial belief.