New Economics Papers
on Microfinance
Issue of 2008‒10‒21
three papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Social protection: Opportunities for Africa By Adato,Michelle; Hoddinott,John
  2. The use of prepaid cards for banking the poor By Prior, Francesc; Santoma, Javier
  3. Are Women More Credit Constrained? Experimental Evidence on Gender and Microenterprise Returns By de Mel, Suresh; McKenzie, David; Woodruff, Christopher

  1. By: Adato,Michelle; Hoddinott,John
    Abstract: "Social protection involves policies and programs that protect people against risk and vulnerability, mitigate the impacts of shocks, and support people who suffer from chronic incapacities to secure basic livelihoods. It can also build assets, reducing both short-term and intergenerational transmission of poverty. It includes social insurance (such as health, life, and asset insurance, which may involve contributions from employers and/or beneficiaries); social assistance (mainly cash, food, vouchers, or subsidies); and services (such as maternal and child health and nutrition programs). Interventions that provide training and credit for income-generating activities also have a social protection component. Interest in social protection is growing across Africa, fueled by persistent high rates of poverty and malnutrition; the undermining of livelihoods and family-based support systems by shocks such as the AIDS epidemic; volatile food prices and the calamities of weather and war; extensive evidence that denying children basic nutrition, health, and education has lifelong, irreversible, and intergenerational consequences; and growing evidence of the effectiveness of social protection in low-income countries throughout the world—particularly in contributing to poverty reduction and improved health, nutrition, and education. Approaches vary across regions and countries, with a notable introduction or scale-up of cash transfers for the very poor in southern and East Africa. While many programs have been undertaken on a pilot basis, successful implementation of large-scale social protection programs in Ethiopia and South Africa—each with more than 8 million beneficiaries—has demonstrated that social protection systems are no longer only within the reach of rich countries." from Author's text
    Keywords: Social protection, Poverty reduction, Hunger, Cash transfers,
    Date: 2008
  2. By: Prior, Francesc (IESE Business School); Santoma, Javier (IESE Business School)
    Abstract: Prepaid products can become an effective instrument for banking the poor, as they can be used for collecting microdeposits and so operate as a low-cost account. Prepaid platforms have characteristics that make them especially useful for developing low-cost microfinance business models. Indeed, customers using prepaid systems do not need bank accounts or debit or credit cards. Prepaid issuers do not need to develop or invest in new technologies, as this mechanism can be used on a range of platforms, including PCs, mobile phones, hand-held and set-top boxes. Furthermore, prepaid products are specially designed for offering services demanded by the poor, such as micropayments, microdeposits and even microcredits. Lastly, they allow users to monitor their cash flow by receiving statements (some providers offer this feature online, others provide physical statements) or accessing balances through PCs, mobile phones, hand-held and set-top boxes. Besides collecting microdeposits, prepaid products (or SVCs as they are called in the United States) offer other services that can be very valuable for serving the unbanked population. As explained in this paper, prepaid products generally lack the identification and credit requirements that effectively bar millions of individuals from opening traditional bank accounts, especially in the United States. Moreover, prepaid products can be purchased and reloaded at a growing number of locations other than bank branches, such as check cashers, convenience stores and other retailers. Prepaid instruments can also provide immediate availability of funds at a cost that, in some cases, is lower than other alternatives for unbanked consumers. Also, prepaid products are difficult to overdraw, thus reducing the likelihood of unexpected fees. Lastly, many prepaid issuers offer some sort of bill pay option, especially branded cards that enable signature-based transactions, and a significant number of them offer remittances.
    Keywords: Prepaid card; microdeposits; mobile phone; store value card; e-money; banking the poor;
    Date: 2008–05–05
  3. By: de Mel, Suresh (University of Peradeniya); McKenzie, David (World Bank); Woodruff, Christopher (University of California, San Diego)
    Abstract: In a recent randomized experiment we found mean returns to capital of between 5 and 6 percent per month in Sri Lankan microenterprises, much higher than market interest rates. But returns were found to be much higher among men than among women, and indeed were not different from zero for women. In this paper, we explore different explanations for the lower returns among female owners. We find no evidence that the gender gap is explained by differences in ability, risk aversion, or entrepreneurial attitudes. Nor do we find that differential access to unpaid family labor or social constraints limiting sales to local areas are important. We do find evidence that women invested the grants differently from men. A smaller share of the smaller grants remained in the female-owned enterprises, and men were more likely to spend the grant on working capital and women on equipment. We also find that the gender gap is largest when we compare male-dominated sectors to female-dominated sectors, although female returns are lower than male returns even for females working in the same industries as men. We then examine the heterogeneity of returns to determine whether any group of businesses owned by women benefit from easing capital constraints. The results suggest there is a large group of high-return male owners and smaller group of poor, high-ability, female owners who might benefit from more access to capital.
    Keywords: microenterprises, gender, microfinance, randomized experiment
    JEL: O12 O16 C93
    Date: 2008–10

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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