Optimism Bias, Over-Indebtedness and Default Risk in Informal Lending Groups: Evidence from South Sudan

Informal lending groups are often celebrated as locally embedded answers to financial exclusion, but their developmental value depends on whether borrowing remains productive and repayable. Objective: This article examines optimism bias, over-indebtedness and default risk in Community Group Saving and Lending (CGSL) groups in rural South Sudan. The study uses a mixed-methods article conversion design based on 85 sampled respondents, 81 valid questionnaire returns and 17 qualitative interviews. Methods: Descriptive statistics, mean-score interpretation, chi-square tests, logistic regression and constructed behavioural-risk indices were used to interpret the relationship between credit access, investment optimism and repayment vulnerability. Results: Inferential findings further showed that CGSL participation was significantly associated with productivity indicators (chi-square = 15.92, p = 0.0001), while access to CGSL credit significantly increased the likelihood of investment in modern agricultural technologies (beta = 1.9459, p = 0.026; odds ratio approximately 7.00). These results confirm that credit matters, but the article argues that credit expansion without repayment realism can convert investment optimism into over-indebtedness. Conclusion: Respondents strongly agreed that rural finance makes a difference to productivity (overall mean = 4.58), that working capital scarcity constrains investment (mean = 4.68), that technology is capital intensive (mean = 4.29), and that credit is a prerequisite for technology adoption (mean = 4.02).

Authors

Publication Details

Journal
Zenodo (CERN European Organization for Nuclear Research)
Published
2026-10-05
DOI
https://doi.org/10.5281/zenodo.22831688
Primary Topic
Microfinance and Financial Inclusion
Type
article
Field-Weighted Citation Impact
0.00
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Optimism Bias, Over-Indebtedness and Default Risk in Informal Lending Groups: Evidence from South Sudan

Makoi Majok Toch
Zenodo (CERN European Organization for Nuclear Research)
Microfinance and Financial Inclusion
article

Optimism Bias, Over-Indebtedness and Default Risk in Informal Lending Groups: Evidence from South Sudan

Makoi Majok Toch
article en

Abstract

Informal lending groups are often celebrated as locally embedded answers to financial exclusion, but their developmental value depends on whether borrowing remains productive and repayable. Objective: This article examines optimism bias, over-indebtedness and default risk in Community Group Saving and Lending (CGSL) groups in rural South Sudan. The study uses a mixed-methods article conversion design based on 85 sampled respondents, 81 valid questionnaire returns and 17 qualitative interviews. Methods: Descriptive statistics, mean-score interpretation, chi-square tests, logistic regression and constructed behavioural-risk indices were used to interpret the relationship between credit access, investment optimism and repayment vulnerability. Results: Inferential findings further showed that CGSL participation was significantly associated with productivity indicators (chi-square = 15.92, p = 0.0001), while access to CGSL credit significantly increased the likelihood of investment in modern agricultural technologies (beta = 1.9459, p = 0.026; odds ratio approximately 7.00). These results confirm that credit matters, but the article argues that credit expansion without repayment realism can convert investment optimism into over-indebtedness. Conclusion: Respondents strongly agreed that rural finance makes a difference to productivity (overall mean = 4.58), that working capital scarcity constrains investment (mean = 4.68), that technology is capital intensive (mean = 4.29), and that credit is a prerequisite for technology adoption (mean = 4.02).

Zenodo (CERN European Organization for Nuclear Research)
Openalex Percentile: Top 7%
Microfinance and Financial Inclusion
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.