New Economics Papers
on Microfinance
Issue of 2008‒01‒26
two papers chosen by
Aastha Pudasainee and Olivier Dagnelie


  1. How Microfinance Associations add value - 2 Observations with references from the Association of MFIs of Uganda (AMFIU) By Schmidt, Oliver
  2. Finding missing markets (and a disturbing epilogue) : evidence from an export crop adoption and marketing intervention in Kenya By Karlan, Dean; Gine, Xavier; Ashraf, Nava

  1. By: Schmidt, Oliver
    Abstract: There are manifold reasons for microfinance association; the most common ones are advocacy, information, capacity building. However, the one unifying rationale of this organisational type appears to be wanting. The following paper makes two cases about the rationale of MF associations: 1. MF associations should NOT be regulatory bodies. In Uganda and elsewhere, there is a tendency to transform associations into apexes, to use them for regulation tasks. This is based on two motives: On the one hand, due to under-conceptualisation of associations, their promoters tend to see a promising opportunity in some regulatory role; its impact is often not well understood or neglected. On the other hand, some government agencies that lack resources and reliable systems for fulfilling regulatory tasks tend to see apexes as a convenient "quick fix." 2. The competitive edge of MF associations lies in improving informational efficiency of the Microfinance sector. MF associations are uniquely positioned to compile data for creation of information – e. g. performance monitoring – that are barred to any other organisation. MF associations should be built around that objective and judged by it. Many interventions oscillate around partial issues of informational efficiency, e. g. credit reference and rating services. Yet, its conceptualisation has been curiously neglected by development partners. Consequently appreciation has been insufficient regarding the specific, impressive management demands faced by MF associations. These are the conclusions of over 2 years working with AMFIU. AMFIU, the microfinance association of Uganda, has been commended as one of the leading MF associations of Africa. AMFIU grew its membership and expanded its operations impressively. In its 12th year of existence, AMFIU membership represents about three quarter of the Ugandan microfinance sector in terms of portfolio and client outreach.
    Keywords: Microfinance; Development; Meso-Level Organisations; Associations; Information; Information Management
    JEL: D85 O12
    Date: 2008–01–18
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:6800&r=mfd
  2. By: Karlan, Dean; Gine, Xavier; Ashraf, Nava
    Abstract: In much of the developing world, many farmers grow crops for local or personal consumption despite export options that appear to be more profitable. Thus many conjecture that one or several markets are missing. This paper reports on a randomized controlled trial conducted by DrumNet in Kenya that attempts to help farmers adopt and market export crops. DrumNet provides smallholder farmers with information about how to switch to export crops, makes in-kind loans for the purchase of the agricultural inputs, and provides marketing services by facilitating the transaction with exporters. The experimental evaluation design randomly assigns pre-existing farmer self-help groups to one of three groups: (1) a treatment group that receives all DrumNet services, (2) a treatment group that receives all DrumNet services except credit, or (3) a control group. After one year, DrumNet services led to an increase in production of export oriented crops and lower marketing costs; this translated into household income gains for new adopters. However, one year after the study ended, the exporter refused to continue buying the cash crops from the farmers because the conditions of the farms did not satisfy European export requirements. DrumNet collapsed in this region as farmers were forced to sell to middlemen and defaulted on their loans. The risk of such events may explain, at least partly, why many seemingly more profitable export crops are not adopted.
    Keywords: Crops & Crop Management Systems,Access to Finance,,Economic Theory & Research,Banks & Banking Reform
    Date: 2008–01–01
    URL: http://d.repec.org/n?u=RePEc:wbk:wbrwps:4477&r=mfd

This issue is ©2008 by Aastha Pudasainee and Olivier Dagnelie. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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