Exactly. Tala's a great analogy insofar as developing world microfinance faces a lot of same challenges Dharma will likely encounter -- namely the lack the of legal recourse for defaults.
I heard a guy talking on Bloomberg radio this morning about this in regards to emerging markets bond investing. The interviewer was commenting that the legal system didn't provide good recourse in the event of default. The guy said like you that the credit analyst would need to focus more on the likelihood of default than the recoverability of the collateral.
It reminded me of my time working on credit models for subprime mortgages. We forecasted 2 variables: frequency and severity of default. The total loss prediction was the product of the two. If your severity is always 100% at least it makes your model simpler.
It reminded me of my time working on credit models for subprime mortgages. We forecasted 2 variables: frequency and severity of default. The total loss prediction was the product of the two. If your severity is always 100% at least it makes your model simpler.