Review of Behavioral Economics, 2019, 6: 367–383 Risk Preference and Microfinance Default: Evidence from a Field Experiment in Mekong Delta Quang Thong Truong 1 , Quang Nguyen 1,2 , Duc Can Vu 1 , Tien Dung Pham 3 and Thanh Binh Phan 4* 1 University of Economics Ho Chi Minh City (UEH) 2 Middlesex University London 3 IDR – UEH 4 Nguyen Tat Thanh University ABSTRACT This study aims to explore the link between risk preferences and microfinance default behavior. An interesting aspect of our study is to conduct a field experiment with 164 Vietnamese microfinance borrowers. We first elicit risk preferences for each individual using real payments. We then link the elicited individual’s risk preferences with their default behavior. The results show that defaulting borrowers are more likely to be risk averse rather than risk loving. Our study offers important implications to microfinance policy makers in developing countries. Keywords: Credit Rationing, Risk, Preference, Microfinance, Default JEL Codes: C93, G21, O12, O16 1 Introduction Microfinance plays an important role in improving well-being of low-income population. At the same time, the success of microfinance depends critically on non-default probability of borrowers. However, the link between default risk and borrower’s behavioral characteristics – especially risk preferences, is underexplored. An important insight from Stiglitz and Weiss (1981) model of credit market is that risk-loving borrowers are incentivized to pursue risky * This research was funded by a grant from the University of Economics Ho Chi Minh City. ISSN 2326-6198; DOI 10.1561/105.00000112 ©2019 Q. T. Truong, Q. Nguyen, D. C. Vu, T. D. Pham and T. B. Phan