New Economics Papers
on Microfinance
Issue of 2005‒12‒09
four papers chosen by
Aastha Pudasainee and Ana Ogarrio

  1. Self Help Groups: Use of modified ROSCAs in Microfinance By Kumar Aniket
  2. Analyser l’impact d’un projet de Micro-finance : l’exemple d’ADéFI à Madagascar By Flore Gubert; François Roubaud
  3. Does Subsidising the Cost of Capital Help the Poorest? An Analysis of Saving Opportunities in Group Lending By Kumar Aniket

  1. By: Kumar Aniket
    Abstract: The paper documents the group lending mechanism used by a typical microfinance lender in Haryana, India. The mechanism had three interesting features. Firstly, the groups were initially formed as Rotating, Saving and Credit Associations. This enabled the lender to screen the groups. Second, there was significant heterogeneity within the group in terms of income and educational achievements. Third, the relatively wealthy individuals dominated the decision making process in the group and were able to obtain a disproportionate amount of credit allocated to the group.
  2. By: Flore Gubert (DIAL, IRD, Paris); François Roubaud (DIAL, IRD, Paris)
    Abstract: (english) This study aims at assessing the impact of a microfinance institution serving micro-entrepreneurs in Antananarivo (Madagascar). It starts by reviewing the recent literature on the socioeconomic impact of microfinance, then moves on to describe the current state of supply and demand of micro-credit in Madagascar. Finally, the results of the examination of the impact of ADéFI financing on microentreprises are presented. The methodology consists of comparing the situation of a representative sample of micro-enterprise ADéFI clients with a control group, constructed in an almost experimental way through a standard matching technique. Overall, the results indicate a positive impact of the project. Taken as a snapshot, the studies conducted in 2001 and 2004 indicate that the microenterprises financed recorded better average performance than informal production units without funding. With a dynamic perspective however, the results were more nuanced. If the positive effect of the project is clear during growth phases, its effect during contractions appears less certain. _________________________________ (français) Cette étude s’attache à analyser l’impact d’une institution de microfinance opérant auprès de microentrepreneurs à Antananarivo (Madagascar). Elle débute par un passage en revue de la littérature récente consacrée à l’impact socio-économique de la micro-finance. Elle décrit ensuite succinctement l’état de l’offre et de la demande de micro-crédit à Madagascar. Elle présente enfin les résultats de l’analyse de l’impact des financements accordés par ADéFI. La méthodologie retenue consiste à comparer la situation d’un échantillon de micro-entreprises clientes d’ADéFI représentatives de l’ensemble de la clientèle de l’institution à celle d’un groupe de contrôle construit de façon quasiexpérimentale par une technique standard d’appariement. Dans l’ensemble, les résultats des analyses concluent à un impact positif du projet. En statique, les évaluations conduites en 2001 et 2004 montrent que les micro-entreprises financées enregistrent de meilleures performances en moyenne que les UPI non financées. En dynamique, les analyses menées sont plus nuancées. Si l’impact positif du projet est clairement établi en phase de croissance, son effet en période de récession paraît plus incertain.
    Keywords: Microfinance, impact assessment, propensity score matching, Madagascar, Microfinance, évaluation d'impact, score de propension.
    JEL: D24
    Date: 2005–11
  3. By: Kumar Aniket
    Abstract: This paper shows that subsidising the cost of capital restricts the ability of the poorest to participate in the group lending mechanisms that include saving opportunities. We document the group lending mechanism used by a typical microfinance lender in Haryana, India. Individuals can participate in the group either as a borrower or a saver. The lender requires that the borrower partly self-finance their project with their own cash wealth. Consequently, a borrower requires a minimum amount of cash wealth to borrow. The poorest participate in the group by co-financing the borrower's project with their meagre savings. In return, they obtain higher than market returns on their savings. Subsidising the cost of capital reduces the cash wealth required to participate in the group as a borrower. Conversely, it increases the cash wealth required to participate as a saver, thus curtailing the opportunity for the poorest to enrich themselves.
    Keywords: Group Lending, Microfinance, Savings, Outreach
    JEL: D82 G20 O12 O2
  4. By: Deepak Shah (Gokhale Institute of Politics & Economics, B.M.C.C. Road, Deccan Gymkhana, Pune 411004, Maharashtra, India)
    Abstract: The rural lending institutions in Maharashtra not only encompass traditional formal sector credit but also new generation credit organizations. The present study specifically focuses on credit experiences of various categories of farmers, including landless households, with these lending institutions with the overall objective of suggesting policy measures relating to ensuring smooth flow of credit to them. The study provides two differing views insofar as the functioning of various lending institutions in Maharashtra is concerned. While new generation lending institutions such as SHGs have shown high rate of interest on loan advances, the traditional lending institutions such as cooperatives and commercial banks are seen to beset with other deficiencies, viz., absence of human capital investment and consumption loans, especially for illness, marriage, and other contingencies. These credit institutions have also shown high transaction cost and delay in delivery of credit, besides showing other deficiencies. The study has emphasized upon the need for both formal and informal credit agencies to have simplified loaning procedures with major focus on extension of credit facilities to poorer sections of the rural community, balanced sectoral development, sustainability and viability, operational efficiency and small farmer coverage. Other suggestions of this study encompass efficient use of ‘Kisan Credit Cards’, group lending through SHGs, etc. Further, as the credit delivery through commercial and cooperative banks invariably depended on ownership of land, the landless households are adversely affected in terms of access to credit and are noticed to be neglected section of rural community. It is, therefore, felt in this study that ownership of land as the criterion for the distribution of credit should be relaxed and group responsibility be introduced by formal credit institutions to safeguard the interest of overall rural community. Identification of poorer groups within the landholding categories is another suggestion of this study with a view to help them to rise above the poverty line by providing them access to credit.
    Keywords: Credit Delivery in India: Experiences with Formal and Informal Lenders
    JEL: G
    Date: 2005–12–02

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