Agent-Based Modelling of Conventions in Microfinance Groups

The focus of this research abstract is the agent-based modelling of conventional social behaviour adopted by individual microfinance clients regarding their collective decision-making for maintaining microcredit groups. Data has been gathered from surveying and observing microcredit clients meetings in the southernmost state of Mexico, Chiapas. The microfinance institution (henceforth MFI) sets out of how and when groups should repay quotas, yet individual credit defaulters are handled independently by the members of each microcredit group on whether these should be cooperated with or penalised. Both social and financial mechanisms are employed, which generate emergent properties and these are shown to be important components in the MFI regulatory framework. For that, an analysis has been made on the interplay occurring in the management of the collective credit scheme, which involves both the creditors formal, institutional rules and the clients’ informal, group-level conventions. As a result of this analysis, a policy change has been made on how microcredit groups are financed, so that both group structure and its social conventions are taken into consideration when credit is being applied for. The development of this agent-based model allowed for a more detailed understanding of the mechanisms at play for maintaining microcredit groups in adversity with regards to the dynamics of credit repayments. This research illustrates an approach to agent-based modelling process that emphasises the collection of localised evidence and stakeholder participation.