nep-mfd New Economics Papers
on Microfinance
Issue of 2009‒12‒11
six papers chosen by
Olivier Dagnelie
Instituto de Analisis Economico, CSIC

  1. Expanding Microenterprise Credit Access: Randomized Supply Decisions to Estimate the Impacts in Manila By Karlan, Dean; Zinman, Jonathan
  2. Group versus Individual Liability: Long Term Evidence from Philippine Microcredit Lending Groups By Karlan, Dean; Gine, Xavier
  3. What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment By Bertrand, Marianne; Karlan, Dean; Mullainathan, Sendhil; Shafir, Eldar; Zinman, Jonathan
  4. Low Income Shelter Financing in Slum Upgrading: India Urban Initiatives By Sally Merrill
  5. Market Imperfections and Farm Technology Adoption Decisions - A Case Study from the Highlands of Ethiopia By Yesuf, Mahmud; Köhlin, Gunnar
  6. Risk Implications of Farm Technology Adoption in the Ethiopian Highlands By Yesuf, Mahmud; Kassie, Menale; Köhlin, Gunnar

  1. By: Karlan, Dean (Yale University and Innovations for Poverty Action); Zinman, Jonathan (Dartmouth College and Innovations for Poverty Action)
    Abstract: Microcredit seeks to promote business growth and improve well-being by expanding access to credit. We use a field experiment and follow-up survey to measure impacts of a credit expansion for microentrepreneurs in Manila. The effects are diffuse, heterogeneous, and surprising. Although there is some evidence that profits increase, the mechanism seems to be that businesses shrink by shedding unproductive workers. Overall, borrowing households substitute away from labor (in both family and outside businesses), and into education. We also find substitution away from formal insurance, along with increases in access to informal risk-sharing mechanisms. Our treatment effects are stronger for groups that are not typically targeted by microlenders: male and higher-income entrepreneurs. In all, our results suggest that microcredit works broadly through risk management and investment at the household level, rather than directly through the targeted businesses.
    JEL: D10 D20 G20 O10
    Date: 2009–07
  2. By: Karlan, Dean (Yale University and Innovations for Poverty Action); Gine, Xavier (World Bank)
    Abstract: Group liability in microcredit purports to improve repayment rates through peer screening, monitoring, and enforcement. However, it may create excessive pressure, and discourage reliable clients from borrowing. Two randomized trials tested the overall effect, as well as specific mechanisms. The first removed group liability from pre-existing groups and the second randomly assigned villages to either group or individual liability loans. In both, groups still held weekly meetings. We find no increase in default and larger groups after three years in preexisting areas, and no change in default but fewer groups created after two years in the expansion areas.
    JEL: C93 D71 D82 D91 G21 O12 O16 O17
    Date: 2009–05
  3. By: Bertrand, Marianne (University of Chicago and Jameel Poverty Action Lab); Karlan, Dean (Yale University and Jameel Poverty Action Lab); Mullainathan, Sendhil (University of Chicago and Jameel Poverty Action Lab); Shafir, Eldar (Princeton University and Innovations for Poverty Action); Zinman, Jonathan (Dartmouth College and Innovations for Poverty Action)
    Abstract: Firms spend billions of dollars each year advertising consumer products in order to influence demand. Much of these outlays are on the creative design of advertising content. Creative content often uses nuances of presentation and framing that have large effects on consumer decision making in laboratory studies. But there is little field evidence on the effect of advertising content as it compares in magnitude to the effect of price. We analyze a direct mail field experiment in South Africa implemented by a consumer lender that randomized creative content and loan price simultaneously. We find that content has significant effects on demand. There is also some evidence that the magnitude of content sensitivity is large relative to price sensitivity. However, it was difficult to predict which particular types of content would significantly impact demand. This fits with a central premise of psychology--context matters--and highlights the importance of testing the robustness of laboratory findings in the field.
    JEL: C93 D01 D12 D14 D21 D81 D91 M31 M37 O12
    Date: 2009–01
  4. By: Sally Merrill
    Abstract: This report summarises findings from the USAID-sponsored project on models of financing for slum upgrading in India, undertaken on behalf of SPARC,a Mumbai-based NGO involved in slum upgrading and the National Housing Bank of India (NHB). This report primarily addresses the following topics: lack of finance for low income housing, lack of participation of banks in construction finance in slum projects, and suggestions for credit enhancements to better leverage subsidies and household contribution.
    Keywords: housing, low-income housing, finance, urban housing finance, finance for low income housing, banks in housing finance, slum projects, slum rehabilitation, subsidies, household contribution, household participation,National Housing Bank, SPARC, Mumbai, India, Urban Studies
    Date: 2009
  5. By: Yesuf, Mahmud (Environmental Economics Policy Forum for Ethiopia, Ethiopian Development Research Institute); Köhlin, Gunnar (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper investigates the impacts of market and institutional imperfections on technology adoption in a model that considers fertilizer use and soil conservation to be joint decisions. Controlling for plot characteristics and other factors, we found that a household’s decision to adopt fertilizer significantly and negatively depends on whether the same household adopts soil conservation. The reverse causality, however, was insignificant. We also found that outcomes of market imperfections, such as limited access to credit, plot size, risk considerations, and rates-of-time preference, were significant factors in explaining variations in farm technology adoption decisions. Relieving the existing market imperfections will most likely increase the adoption rate of farm technologies.<p>
    Keywords: Bivariate probit; fertilizer adoption; market imperfections; risk aversion; time preferences; soil conservation
    JEL: C35 D43 Q12 Q24
    Date: 2009–11–30
  6. By: Yesuf, Mahmud (Environment for Development-Kenya, Kenyan Institute for Public Policy Research and Analysis (KIPPRA)); Kassie, Menale (Department of Economics, School of Business, Economics and Law, Göteborg University); Köhlin, Gunnar (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In countries where insurance and credit markets are thin or missing, production and consumption risks play a critical role in the choice and use of production inputs and adoption of new farm technologies. In this paper, we investigated impacts of chemical fertilizer and soil and water conservation technologies adoption on production risks, using a moment-based approach and two years of cross-sectional data. A pseudo-fixed-effect model was estimated to generate first, second, and third moments of farm production. Our results revealed that fertilizer adoption reduces yield variability, but increases the risk of crop failure. However, adopting soil and water conservation technology has no impact on yield variability, but reduces the downside risk of crop failure. The results underscore that the risk implications of farm technology adoption vary by technology type. Furthermore, policies that promote adoption of fertilizers should be complemented by desirable instruments that hedge against downside risk. In that respect, if properly implemented, the safety net program and the weather insurance programs currently piloted in some parts of Ethiopia are actions in the right direction.<p>
    Keywords: production risks; farm technology; moment-based approach; Ethiopia
    JEL: C33 D21 Q16 Q24
    Date: 2009–11–30

This nep-mfd issue is ©2009 by 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.