Transition Probability Matrix of Microcredits: The case of a Mexican microfinance

  • Verónica P. Rodríguez Vázquez Universidad de las Américas Puebla
  • Japhet Hernández Vaquero Management Solutions
Keywords: microfinance, credit risk, transition probability matrix, Markov chains, Value at Risk.
JEL Classification: G21, G32

Abstract

Microfinance in Mexico has developed at an accelerated pace and the efforts in credit risk management in this sector are scarce. The goal of this work is the construction of a Transition Probability Matrix in the rating of microcredits which can be used in the estimation of Value at Risk (VaR), observing the regulations of the Unique Circular of Saving and Popular Credit emitted by “Commission of National Banking and Securities” CNBV. Both, the methodology for its construction based in Markov chains theory and the obtained results, are presented. The hypotheses of absorbing state and the high recovery of microcredit are confirmed. Finally it is detected that men are as good payers as women.

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Published
01-01-2013
How to Cite
Rodríguez VázquezV., & Hernández VaqueroJ. (2013). Transition Probability Matrix of Microcredits: The case of a Mexican microfinance. Estudios Económicos, 28(1), 39-77. https://doi.org/10.24201/ee.v28i1.85
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