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on Microfinance |
| By: | Leonardo Becchetti (University of Rome Tor Vergata); Pierluigi Conzo (University of Rome Tor Vergata) |
| Abstract: | Creditworthiness and trustworthiness are almost synonyms since the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness-trustworthiness nexus in an investment game experiment on a sample of participants/non participants to a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. Trustees’ first and second order beliefs are also consistent with this picture. Our findings identify a “horizontal trustworthiness externality” which creates a direct (loan-performance) causality nexus since the mere loan provision increases the borrower’s attractiveness as a business partner. |
| Keywords: | field experiment, microfinance, investment game, trust, trustworthiness |
| JEL: | O16 C93 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:ent:wpaper:wp17&r=mfd |
| By: | Llanto, Gilberto M.; Badiola, Jocelyn Alma R. |
| Abstract: | Using data from a quick survey of various rural (RFIs) and microfinance institutions (MFIs) in East Asia, the paper tries to find out how those institutions and their clientele have been affected by the global financial crisis, how they have coped with the ongoing crisis, and what they plan to do in the future to ensure the stability of the rural financial system and the continuing access of clients to financial services. The microfinance sector in Asia continues to evolve with emphasis on efficiency and strong growth in outreach. The limited data from the quick survey validate the growth in loan portfolios and increase in the number of clients, with growth varying significantly by country depending on internal and external factors during the period before the global financial crisis. Impacts vary depending on external and internal factors faced by RFIs and MFIs. However, they continue to maintain a positive attitude and expect that business will pick up as a result of an increase in demand for loans to finance livelihood projects and various microenterprises. They are aware of the threats and opportunities brought about by the global financial crisis. The analysis leads to some lessons for policymakers, bank regulators, rural financial institutions, and microfinance institutions that are committed to provide inclusive financial services to member clients. |
| Keywords: | regulatory framework, global financial crisis, loan portfolio quality, credit crunch, inclusive financial service |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:phd:dpaper:dp_2009-24_(revised)&r=mfd |
| By: | Helena Marrez (Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels); Mathias Schmit (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels) |
| Abstract: | This paper is the first to analyze the credit risk of a microfinance institution based on the loan portfolio of a leading Maghrebian microfinance institution, both in terms of number of clients served and of portfolio size. This allows us to work with a proprietary data set of 1,144,770 contracts issued between 1997 and 2007. Using a resampling technique, we estimate the probability density function of losses and value-at-risk measures for a portfolio of loans granted to female and male microfinance clients separately. Results show that loss rates are higher for a male client population than for a female client population, both on average as for percentiles 95 to 99.99. We find that this difference is due to lower default probabilities for female clients, while recovery rates for male and female clients are similar. We also analyze diversification effects, where we find that the proportion of diversifiable risk in total risk is bigger for portfolios of loans granted to female clients than for portfolios of loans granted to male clients. Finally we show that capital requirements determined by the 99.9 percentile remain below those required by the Basel 2 Accords, which opens perspectives for a specific treatment of microfinance if financial regulation becomes applicable to the sector. |
| Keywords: | Microfinance; Credit risk; Gender study; Bank regulation; Capital requirement |
| JEL: | G21 G28 O16 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:09-053&r=mfd |
| By: | Reyes, Celia M; Domingo, Sonny N. |
| Abstract: | Crop insurance is a risk management tool designed to even out agricultural risks and address the consequences of natural disasters to make losses more bearable, especially to the marginalized farmers. In the Philippines, the Philippine Crop Insurance Corporation (PCIC) implements and manages the government program on agricultural insurance. This paper provides a comprehensive review of the crop insurance program in the Philippines--its history, operationalization, performance, and a number of challenges. Some of the identified constraints in operating the program are high overhead cost, need for larger investment fund, and question of sustainability. The results of secondary data assessment and key informant interviews revealed that PCIC has captured only a small segment of its target clientele, particularly the subsistence farmers, due to logistical and marketing constraints. Moreover, farmer dependence on informal credit, particularly in rural farming communities, seems to have also created a nonviable setting for a crop insurance program. |
| Keywords: | seasonal climate forecast (SCF), agricultural credit, crop insurance, Philippine Crop Insurance Corporation (PCIC) |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:phd:dpaper:dp_2009-12&r=mfd |
| By: | Reyes, Celia M; Domingo, Sonny N.; Gonzales, Kathrina G.; Mina, Christian D. |
| Abstract: | <p>In the face of seasonal climate variability, the smallholder farmers, particularly those in rural communities, are among the most adversely affected. As a way to address this, together with concern on low productivity, the Philippine government has been implementing a range of risk management programs for farmers and other agricultural stakeholders. Based on key informant surveys and focus group discussions with rice and corn farmers conducted in key producing areas, however, farmers reported that they still have limited options in terms of changing their production decisions in response to seasonal climate forecasts (SCFs). Among the risk mitigation tools available, the following emerged as most preferred by farmers: localized climate information, accessible credit, crop insurance, and special assistance programs such as irrigation and seeds provision.</p> <p>This paper tackles these programs in detail and then discusses the challenges besetting these programs. The paper also presents some policy options which could enhance the delivery of these agricultural services in pursuit of improved productivity and welfare in target farming communities in the country.</p> |
| Keywords: | irrigation, seasonal climate forecast (SCF), risk management programs, localized climate information, agricultural credit, crop insurance, seeds subsidy |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:phd:dpaper:dp_2009-11&r=mfd |