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on Microfinance |
| By: | Deininger, Klaus; Liu, Yanyan |
| Abstract: | Despite their potential importance and ease of modification, impacts of monitoring and loan recovery arrangements on micro-credit groups'repayment performance have rarely been studied. Data on 3,350 expired group loans in 300 Indian villages highlight that regular monitoring and audits, high repayment frequency, consumption smoothing support through rice credit, and having group savings deposited with the lender all significantly increase repayment rates. Estimated magnitudes of their effects vastly exceed those of members'socio-economic characteristics. Significantly lower repayment on loans originating in externally provided grant resources suggests that stringent monitoring will be essential for these to have a sustainable impact. |
| Keywords: | Access to Finance,Debt Markets,,Bankruptcy and Resolution of Financial Distress,Strategic Debt Management |
| Date: | 2009–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4885&r=mfd |
| By: | Beatriz Armendariz (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels and DULBEA, Université Libre de Bruxelles, Brussels.); Ariane Szafarz (Centre Emile Bernheim, CERMi, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels, Harvard University and University College London.) |
| Abstract: | This paper sheds light on a poorly understood phenomenon in microfinance which is often referred to as a “mission drift”: A tendency reviewed by numerous microfinance institutions to extend larger average loan sizes in the process of scaling – up. We argue that this phenomenon is not driven by transaction cost minimization alone. Instead, poverty – oriented microfinance institutions could potentially deviate from their mission by extending larger loan sizes neither because of “progressive lending” nor because of “cross – subsidization” but because of the interplay between their own mission, the cost differentials between poor and unbanked wealthier clients, and region-specific characteristics pertaining the heterogeneity of their clientele. In a simple one-period framework we pin-down the conditions under which mission drift can emerge. Our framework shows that there is a thin line between mission drift and cross-subsidization, which in turn makes it difficult for empirical researchers to establish whether a microfinance institution has deviated from its poverty-reduction mission. This paper also suggests that institutions operating in regions which host a relatively small number of very poor individuals might be misleadingly perceived as deviating from their mission. Because existing empirical studies cannot tear apart between mission drift and cross-subsidization, these studies should not guide donors and socially responsible investors pertaining resource allocation across institutions offering financial services to the poor. The difficulty in tearing apart cross-subsidization and mission drift is discussed in light of the contrasting experiences between microfinance institutions operating in Latin America and South Asia. |
| Keywords: | microfinance, mission drift, poverty reduction, cross-subsidization |
| JEL: | F35 G21 G28 O54 O57 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:09-015&r=mfd |
| By: | Deininger, Klaus; Liu, Yanyan |
| Abstract: | Despite the popularity and unique nature of women's self-help groups in India, evidence of their economic impacts is scant. Based on two rounds of a 2,400 household panel, the authors use double differences, propensity score matching, and pipeline comparison to assess economic impacts of longer (2.5-3 years) exposure of a program that promoted and strengthened self-help programs in Andhra Pradesh in India. The analysis finds that longer program exposure has positive impacts on consumption, nutritional intake, and asset accumulation. Investigating heterogeneity of the impacts suggests that even the poorest households were able to benefit from the program. Furthermore, overall benefits would exceed program cost by a significant margin even under conservative assumptions. |
| Keywords: | Access to Finance,,Rural Poverty Reduction,Poverty Monitoring&Analysis,Debt Markets |
| Date: | 2009–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4886&r=mfd |
| By: | Deininger, Klaus; Liu, Yanyan |
| Abstract: | Although there has been considerable recent interest in micro-credit programs, rigorous evidence on the impacts of forming self-help groups to mobilize savings and foster social empowerment at the local level is virtually non-existent, despite a large number of programs following this pattern. The authors use a large household survey to assess the economic and social impacts of the formation of self-help groups in India. They find positive impacts on empowerment and nutritional intake in program areas overall and heterogeneity of impacts between members of pre-existing and newly formed groups, as well as non-participants. Female social and economic empowerment in program areas increased irrespective of participation status, suggesting positive externalities. Nutritional benefit was more pronounced for new participants than for members of pre-existing groups. Evidence of higher consumption - but not income or asset formation - by participants suggests that at the time of the survey, the program's main economic impact had been through consumption smoothing and diversification of income sources rather than exploitation of new income sources. Evaluation of such programs in ways that allow heterogeneity of program impact can yield highly policy-relevant insights. |
| Keywords: | Access to Finance,Housing&Human Habitats,Social Accountability,Poverty Monitoring&Analysis, |
| Date: | 2009–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4884&r=mfd |
| By: | Richard Coleman (Texas A&M University Kingsville's System Center San Antonio) |
| Abstract: | In the last few years, the microfinance movement has been widely recognized as a major weapon in the global fight against poverty. It has come to be seen as the means by which millions of the very poor have broken the cycle of poverty. By providing an alternative to a dependence on the local money-lender for capital, microfinance institutions have provided loans, mostly to women, to start new entrepreneurial ventures.This paper will examine the history of the microfinance movement, from its beginnings, to its current global popularity. In addition, the issues and problems caused by the very success in greater access to capital that the industry has long sought will also be examined. The not-for-profit business model traditionally employed by microfinance institutions is examined in comparison to the newer for-profit model favored by many. The advent of some microfinance institutions which charge what many view as exorbitant interest rates is also considered. Finally, the paper will attempt to answer the question of whether or not these changes represent a positive move or simply mission drift from the original concept.This paper was presented May 23, 2008 at the 18th International Conference of the International Trade & Finance Association at Universidade Nova de Lisboa in Lisbon, Portugal. |
| Date: | 2008–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:bep:itfapp:1139&r=mfd |