New Economics Papers
on Microfinance
Issue of 2009‒07‒17
six papers chosen by
Aastha Pudasainee and Olivier Dagnelie

  2. DYNAMICS OF MARKET SHARE IN THE MICROFINANCE INDUSTRY IN BANGLADESH By Mahmoud, Chowdhury Shameem; Khalily, M. A. Baqui; Wadood, Syed Naimul
  5. An Experimental Analysis of Group Size and Risk Sharing By Ananish Chaudhuri; Lata Gangadharan; Pushkar Maitra
  6. Saving among Low-Income Women: Motivation and Obstacles By Helen Levy; Kristin Seefeldt

  1. By: Asadul Islam Author-X-Name-Asadul
    Abstract: This paper evaluates the impact of microfinance on household consumption using a new, large and unique cross-section data set from Bangladesh. The richness of the data and program eligibility criterion allow the use of a number of non-experimental impact evaluation techniques, in particular instrumental variable (IV) estimation and propensity score matching (PSM). Estimates from both IV and PSM strategies have been interpreted as average causal effects that are valid for various groups of participants in microfinance. The overall results indicate that the effects of micro loans are not robust across all groups of poor household borrowers. It appears that the poorest of the poor participants are among those who benefit most. The impact estimates are lower, or sometimes even negative, for those households marginal to the participation decision. The effects of participation are, in general, stronger for male borrowers. These results hold across different specifications and methods, including correction for various sources of selection bias (including possible spill-over effects).
    Keywords: Microfinance, treatment effect, Matching, Consumption.
    JEL: C31 H43 I30 L30 O12
    Date: 2009–06
  2. By: Mahmoud, Chowdhury Shameem; Khalily, M. A. Baqui; Wadood, Syed Naimul
    Abstract: We discuss evidence that the microcredit industry in Bangladesh has seen emergence of large variations in the size of the microfinance institutions operating in the market-- on the one hand, there are large national-level MFIs, while on the other hand, small localized MFIs operating only within the confines of a small area. Data from a recent survey of Pathrail union in Tangail district, a seasoned place for microcredit, reveals that within the local market competition is becoming more and more intense over time between established national-level MFIs and newly emerging local-level MFIs for market shares in terms of loan amount as well as borrowed members. Data reveals that there is market segmentation where some borrowers and MFIs opt for a package of low interest rates tied with low amount of loan disbursed and some other borrowers and MFIs settle for a package of high interest rates tied with high amount of loan disbursed. A Tobit regression estimation of member market shares in village micro credit market shows that size of the MFI, years of operation in the village, average loan size, deposit interest rates, loan amount disbursed for unique loan purposes (i.e., housing loan) are key determinants in determining MFI shares of a village microcredit market.
    Keywords: Microcredit; Market Share; Product and Provider Characteristics of Microcredit
    JEL: L11 C34 D02 D4 L1 G21
    Date: 2009–07–10
  3. By: Asadul Islam; Pushkar Maitra
    Abstract: This paper estimates, using a large panel data set from rural Bangladesh, the effects of health shocks on household consumption and how access to microcredit affects households' response to such shocks. Our results suggest that even though in general consumption remains stable in many cases when households are exposed to health shocks, households that have access to microcredit appear to cope (slightly) better. The most important instrument used by households appear be sales of productive assets (livestock) and there is a significant mitigating effect of microcredit: households that have access to microcredit do not need to sell livestock to the extent households that do not have access to microcredit need to, in order to insure consumption against health shocks. The results suggest that microcredit organizations and microcredit per se have an insurance role to play, an aspect that has not been analyzed previously.
    Keywords: Health Shocks, Microcredit, Consumption Insurance, Bangladesh.
    JEL: O12 I10 C23
    Date: 2009–06
  4. By: Dyuti Banerjee; Anupama Sethi
    Abstract: In this paper we consider different forms of intra-group transfers and the resulting type of group formation. We introduce the concept of partial joint liability and revenue sharing and show that this form of intra-group transfer may result in heterogeneous group formation. Its uniqueness is established by the fact that other transfer schemes always result in homogenous group formation.
    Keywords: Heterogeneous group formation, partial joint liability and revenue sharing
    JEL: O12 O16
    Date: 2009–06
  5. By: Ananish Chaudhuri; Lata Gangadharan; Pushkar Maitra
    Abstract: We study the relationship between group size and the extent of risk sharing in an insurance game played over a number of periods with random idiosyncratic and aggregate shocks to income in each period. Risk sharing is attained via agents that receive a high endowment in one period making unilateral transfers to agents that receive a low endowment in that period. The complete risk sharing allocation is for all agents to place their endowments in a common pool, which is then shared equally among members of the group in every period. Theoretically, the larger the group size, the smaller the per capita dispersion in consumption and greater is the potential value of insurance. Field evidence however suggests that smaller groups do better than larger groups as far as risk sharing is concerned. Results from our experiments show that the extent of mutual insurance is significantly higher in smaller groups, though contributions to the pool are never close to what complete risk sharing requires.
    Keywords: Reciprocity, Risk Sharing, Group Size, Experiments.
    JEL: O12 C92 D81
    Date: 2009–06
  6. By: Helen Levy (University of Michigan); Kristin Seefeldt (University of Michigan)
    Abstract: How do low-income households think about saving? What motivations do they identify for saving, and what obstacles to meeting their goals? We use data from qualitative interviews with 51 households in Detroit to shed light on these questions. We find that they wish they could save - primarily for protection against the unexpected or to put children through college - but that most of them cannot. Friends and family surface as a major obstacle to saving, since those who have liquid assets are asked for help. When savings is feasible in this population, it occurs largely through relatively inaccessible vehicles such as pensions and 401Ks.
    Date: 2008–09

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