New Economics Papers
on Microfinance
Issue of 2009‒06‒10
four papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  1. Does regulatory supervision curtail microfinance profitability and outreach ? By Cull , Robert; Demirguc-Kunt , Asli; Morduch, Jonathan
  2. Impact assessments in finance and private sector development : what have we learned and what should we learn ? By McKenzie, David
  3. The Distributive Impact of Reforms in Credit Enforcement: Evidence from Indian Debt Recovery Tribunals By Ulf von Lilienfeld-Toal; Dilip Mookherjee; Sujata Visaria
  4. Credit Risk Evaluation for Loans of Banco Agrario in Colombia (PowerPoint) By Hennings, Enrique; Trujillo-Barrera, Andres; Katchova, Ani; Gomez, Miguel; Estrada, Dairo

  1. By: Cull , Robert; Demirguc-Kunt , Asli; Morduch, Jonathan
    Abstract: Regulation allows microfinance institutions to evolve more fully into banks, particularly for institutions aiming to take deposits. But there are potential trade-offs. Complying with regulation and supervision can be costly. The authors examine the implications for the institutions’ profitability and their outreach to small-scale borrowers and women. The tests draw on a new database that combines high-quality financial data on 245 of the world’s largest microfinance institutions with newly-constructed data on their prudential supervision. Ordinary least squares regressions show that supervision is negatively associated with profitability. Controlling for the non-random assignment of supervision via treatment effects and instrumental variables regressions, the analysis finds that supervision is associated with substantially larger average loan sizes and less lending to women than in ordinary least squares regressions, although it is not significantly associated with profitability. The pattern is consistent with the notion that profit-oriented microfinance institutions absorb the cost of supervision by curtailing outreach to market segments that tend to be more costly per dollar lent. By contrast, microfinance institutions that rely on non-commercial sources of funding (for example, donations), and thus are less profit-oriented, do not adjust loan sizes or lend less to women when supervised, but their profitability is significantly reduced.
    Keywords: Access to Finance,Debt Markets,Banks&Banking Reform,,Economic Theory&Research
    Date: 2009–06–01
  2. By: McKenzie, David
    Abstract: Until recently rigorous impact evaluations have been rare in the area of finance and private sector development. One reason for this is the perception that many policies and projects in this area lend themselves less to formal evaluations. However, a vanguard of new impact evaluations on areas as diverse as fostering microenterprise growth, microfinance, rainfall insurance, and regulatory reform demonstrates that in many circumstances serious evaluation is possible. The purpose of this paper is to synthesize and distil the policy and implementation lessons emerging from these studies, use them to demonstrate the feasibility of impact evaluations in a broader array of topics, and thereby help prompt new impact evaluations for projects going forward.
    Keywords: Access to Finance,,Debt Markets,Banks&Banking Reform,Microfinance
    Date: 2009–05–01
  3. By: Ulf von Lilienfeld-Toal (Stockholm School of Economics); Dilip Mookherjee (Boston University); Sujata Visaria (Boston University)
    Abstract: It is generally presumed that strengthening legal enforcement of lender rights increases credit access for all borrowers, by expanding the set of incentive compatible loan contracts. This is based on an implicit assumption of infinitely elastic supply of loans. With inelastic supply, strengthening enforcement generates general equilibrium effects which reduce credit access for small borrowers while expanding it for wealthy borrowers. We find evidence from a firm-level panel data set of such adverse distributional impacts of an Indian judicial reform which increased banks’ ability to recover non-performing loans in the 1990s.
    Date: 2009–04
  4. By: Hennings, Enrique; Trujillo-Barrera, Andres; Katchova, Ani; Gomez, Miguel; Estrada, Dairo
    Keywords: Agricultural Finance, Risk and Uncertainty,
    Date: 2008

This issue is ©2009 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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