How far can we go? Determining the optimal loan size in progressive lending

For microfinance institutions (MFIs) with double bottom line objectives and trade-offs, the optimal loan size can be determined by using a combination of Markovian Chains transition probabilities expected cash flows. Progressive lending may safe over range sizes, beyond which rational borrower would indulge in strategic default. This sizes depend on characteristics (risk-taking, self-confidence, productivity, interest rates, subsistence needs) Microfinance Institution's strategy (financial inclusion objective, progressive lending). MFIs improve objective functions better communication encouragement borrowers to increase their confidence each stage reassuring them that entrepreneurial failure will not mean being denied second chance.